nonpurpose loan

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Nonpurpose loan

A loan with securities pledged as collateral, but which is not to be used in securities trading or transactions.

Nonpurpose Loan

A loan secured by securities that is used to buy something other than more securities. An investment bank is allowed to lend up to 90% of the value of the securities used as collateral, provided the borrower submits an affidavit stating the reason for the loan. A nonpurpose loan is not subject to the same margin requirements as a purpose loan, which is used to buy securities. See also: Regulation T.

nonpurpose loan

A loan that uses securities as collateral, with proceeds from the loan being used to purchase something other than additional securities. A person may prefer a nonpurpose loan over a regular installment loan because of the lower interest rate. Nonpurpose loans are not subject to margin requirements as regular margin loans are. Compare purpose loan.
References in periodicals archive ?
The proceeds of a non-purpose loan may not be used to purchase, carry or trade securities.
While a margin loan must be drawn in the same account where the eligible securities are held, a non-purpose loan is held in a separate account; thus, multiple asset accounts may be pledged to secure one non-purpose loan.
A securities-based loan uses equities or bonds as collateral for a non-purpose loan ranging from $100,000 to $10 million, depending upon the borrower.
Harrington Capital Management Harrington Capital Management is an independent asset and wealth management company headquartered in Dallas, Texas offering active portfolio management, retirement planning, estate planning, insurance services, non-purpose loans and education planning.
FINRA has temporarily suspended the 100-percent maintenance margin restriction and is allowing member firms to offer non-purpose loans collateralized by ARPS subject to certain requirements and conditions.

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