nonpurpose loan

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 two major types of securities-based loans are purpose loans and nonpurpose loans; however, this discussion will focus only on the nonpurpose variety.