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.
In addition, there may be higher borrowing limits or release percentages against the value of your eligible securities when they are pledged for a 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.
Respondent UBS exercised extreme recklessness and indifference to the consequences of loan recycling by failing to utilize a supervisory system which would have alerted upper management that claimant Romero and taken $8 million from his non-purpose loan account one day and redeposited the exact same amount less than two weeks later to buy securities," the regulatory panel explained in its decision.
The new partnership with Goldman Sachs is intended to allow the firm to offer streamlined access to non-purpose loans that are collateralised by a borrower's non-retirement investment portfolio.
Fidelity says the agreements mean investors will have "expanded access to non-purpose loans secured by the client's brokerage account assets.
Fidelity says its clearing unit will continue to offer margin borrowing and non-purpose loans to wealth management clients of advisor and brokerage firms it works with, as well as products like credit cards, debit cards, checking and bill payment.

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