Questions & Answers
What can I use my line of credit for?

Anything you want, except to buy additional securities or mutual funds. The idea is to stay invested and avoid the capital gains taxes associated with redemption of shares in time of financial need. This loan is termed a "Non-Purpose" loan by the Federal Reserve.

Is my interest rate fixed?

No, the annual percentage rate (APR) will increase or decrease as the "Index" increases or decreases. Any increase in the Periodic Rate will result in higher Minimum Payment amounts.

How much can I borrow? What is the ratio of Collateral to the total line of credit amount?

The amount you may borrow depends on the risk category of your securities. Our collateral ratios vary widely from 65% to 95% depending on your securities.

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How is my interest calculated?

A daily finance charge will be imposed on all credit advances made under your credit line, calculated from the date of each credit advance, based on the daily average balance. The finance charge is determined by multiplying your "Periodic Rate" by your daily average balance. Then we multiply the result by the number of days in the billing cycle for the billing period.

Is the interest I pay tax deductible?

In most cases no, but it might be, depending on the use of funds. Always check with your tax advisor.

How often will I receive a statement showing my mutual funds?

You will receive a consolidated monthly statement for all the transferred fund shares showing the current value of your securities, your current loan balance and the current finance charge.

When are my payments due?

Your payments are due monthly.

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How do I get my initial check?

In order to try to protect the borrower, it is the practice of Presidential Bank that all initial disbursements be made in check form and be physically sent to the address that is imprinted on the account statement copies that are provided with the "Securities Transfer" form.

What happens when the stock market significantly swings downward?

Your loan, as well as every loan, has an established safety zone that is monitored by our system on a daily basis. We first contact you via the email address that you provided when establishing the loan and follow the initial procedures you choose to address any shortfall in your loan's collateral ratio. If a severe drop in market prices occurs, we may not be able to reach you in advance of sales of securities (partial or all), which may be necessary to preserve the collateral ratio. The collateral ratio is your borrowing power ratio of loan balance to the market value of the pledged securities. If we can reach you then you will be given the choice of adding more securities, making a cash payment to reduce the loan principal, or both. It is very important that we have your current contact information.

What happens when the stock market significantly swings upward?

Your borrowing power increases.

Am I going to receive tax documents like 1099's from the shares held in your control?

Yes, you will receive 1099's. If you provide the original purchase date and the cost of the funds we can provide you with a report that will assist you in preparing your tax returns.

Can I pay off the loan at any time?

Yes, there are no prepayment fees.

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Updated: 12/17/2021 - MH

Presidential Bank
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