in today's video we're going to be looking at the lombard credit and loan guide now if you're looking to access lombard credit well congratulations you've stumbled across one of the oldest secrets in the banking world in fact as you'll learn in this video lombard credit predates modern banking and has been used by some of the wealthiest families in europe for over 500 years now you might be asking yourself what is lombard credit well lombard credit is asset-backed financing which is collateralized against liquid investments such collateral often includes stocks bonds exchange traded funds and life insurance that is already in custody of the lending bank this arrangement known as lombard lending can result in favorable interest rates for clients in this video we're going to explain how to access longboard credit we'll also discuss who should be using lombard loans and share some examples when lombard credit actually makes sense but before we get started make sure you hit the subscribe button and the notification bell so you get alerted every time we post new non-resident banking opportunities now to help you better understand the lombard credit loan process we have a free non-resident banking starter guide it's designed to help non-resident and foreigners open bank accounts all around the world so don't forget to download your copy using the link in the description below now one thing you might not know is that lombard credit pre-dates modern banking in the west it traces its roots back to northern italy in the 12th century a region known as lombardi here the franciscan order of monks was permitted to engage in lombard lending allowing them to circumvent the restrictions imposed by the vatican on charging interests over the following centuries goldsmith bankers moneylenders and pawn brokers originating from lombardi arrived in major european cities and they set up their pawn shop style institutions expanding their trade and laying the groundwork for modern banking in many major european cities such as london paris dublin and hamburg important streets still carry the name lombard marking the place where these early financing outfits first set up shop so it's really no surprise that this 500 plus year old practice still continues today and it's still practiced by some of the most oldest and most well established banks across the world likewise it's not surprising that wealthy families continue to use lombard credit as a tool in their banking arsenal to make the most out of their financial relationships and increase their personal wealth now let's take a look at when you should consider using lombard credit and who should use lombard credit interestingly enough it's not just for the super rich so first things first how do lombard loans work well before diving in it's important to have a solid understanding of how lombard credit or lombard loans actually work now as we've shared already lombard credit refers to borrowing from a bank against other investments or collateral while this may sound a lot like a standard mortgage it's not to this end we'll discuss the specific differences between lombard loans and mortgages in just a minute now with a lombard loan banks typically have or take custody of other liquid assets such collateral often includes stocks bonds exchange traded funds and life insurance now in some cases this can also include less liquid investments that usually requires a strong pre-existing relationship with the bank now in most instances because the bank has custody of the collateral which in most cases can be converted quickly to cash in the event of a default the borrower usually can obtain favorable interest rates additionally as we'll discuss in the next section most lombardon loans are provided on a fixed basis this means that at the end of the lombard term both the bank and the borrower expect the loan to renew now you might be wondering when should you use lombard credit well in this video we'll discuss lombard credit as it relates to the needs of private banking clients we'll save any discussion about interbank lumbar facilities for another day now generally speaking lombard credit refers to boring against your assets but unlike taking out a mortgage on a fixed asset like a house or vehicle lombard credit is typically tied to liquid cash-like investments and is available on a revolving basis this can include investments such as stocks bonds exchange traded funds other portfolios and even life insurance of course each bank has its own policies for what they will and will not accept so why would you use lombard credit now you might be wondering why someone with liquid wealth would ever want to use lombard credit well there are countless situations where a private banking client may find themselves wanting to access lombard credit for instance if you're interested in making a new investment or large purchase you might need to liquidate a portion of your existing investments to afford the purchase in cash instead of cashing out you could consider lombard credit as an alternative option this is especially attractive since selling existing investments could result in losses or capital gains tax additional transaction fees and the opportunity cost of not holding your existing investment long term instead you can use lombard credit to leverage your existing portfolio to unlock additional financing at favorable rates and at the same time you eliminate the negative consequences of selling any existing investments now you might be wondering what are lombard loans interest rates well since lombard credit is collateralized against existing liquid assets the rates that banks charge are often very attractive this makes sense for a number of reasons especially since the assets held as collateral are often already in the lending bank's custody whether directly via bank products or indirectly through the bank's investment arm with this in mind let's consider a few factors impacting lombard and loan interest rates that prospective borrowers should know lombard loan interest rates are a combination of the bank's cost of borrowing otherwise known as the inter-bank rate and the bank's margin for providing the service next most bank margins are in the range of one to three percent depending on the bank the country they operate in and the currency that the client is looking to borrow next as with all private banking services long bar loan interest rates are negotiable and the clients should push for terms that suit their financing needs and while maintaining existing relationships is usually less disruptive borrowers may be able to obtain better lombard loan interest rates if they approach new banks with the prospect of moving their investments there as well additionally by extending lombard credit to clients banks are able to simultaneously encourage clients to purchase additional securities invest in other bank products or use other forms of bank financing resulting in higher commissions and transaction fees for the bank so it's also in the bank's own interest to ensure that the lombard loan interest rates are attractive to clients lombard loans help both the bank and the client make more money now what are the benefits of lombard credit well like all financial products the benefits of lombard credit ultimately depend on the individual accessing the service likewise one of the main catalysts which will determine how beneficial lumbar credit can be is the reason why someone is accessing the lombard facility that said there are some general benefits that most borrowers are looking to access when obtaining lumbar credit from their bank including immediate access to additional capital without liquidating investments flexible use allowing borrowers to take advantage of many opportunities providing liquidity in times of cash shortages or uncertainty favorable interest rates compared to traditional loan facilities flexible loan to value rates based on client needs ranging from fifteen percent to ninety percent available most major currencies to suit borrower requirements and flexible terms and available on a rotating basis for continued access of course just because these benefits are of interest to you doesn't mean that you should use lumbar credit with this in mind let's take a look at who should actually consider lombard credit so now that you know what to expect when it comes to lombard credit let's discuss who should consider lombard facilities and whether it's a good option for you first as we've already mentioned you don't need to be super rich to access the benefits of lombard credit but you will need to have some money after all this is predominantly a service offered to private banking clients who already have existing portfolios now for this reason lombard credit is best suited to those clients who have an established relationship with a private bank and have a liquid investment portfolio or those who are able to establish a relationship with a private bank by making a sizable deposit this typically requires at least 1 million us dollars starting out but in most cases private banks want to see between 3 and 5 million us to get started and in all cases if you're specifically interested in lombard credit make sure the bank that you're considering is able to offer this to you this means confirming the bank's specific requirements and also ensuring that the bank is able to use the type of collateral you have to facilitate lombard credit for your intended purposes next let's look at the lombard loan versus a mortgage loan now a common misunderstanding among prospective borrowers involves the pros and cons of a lombard loan versus a mortgage loan in fact in some instances many people approach lombard loans as a form of reverse mortgage but this isn't accurate unlike a mortgage lombard loans require the borrower to hold liquid or cash-like assets this is in contrast to mortgage loans which are often determined through a combination of the underlying value of a fixed asset like property and the borrower's ability to service the loan in reality lombard loans are tools that enable clients of private banks to make more money enabling them to leverage existing investments without the need to liquidate their existing holdings likewise they enable the bank to do the same through interest payments on investments that they are already holding custody not only does this help both parties increase their economic prospects it also builds a stronger and longer-term relationship between the bank and the borrower sometimes that is too often overlooked in private banking today now what are some of the risks associated with lombard credit well like any financial transaction there are risks involved and before deciding to access lumbar credit facilities you need to understand how these risks could impact you your current investments and future acquisitions naturally as with any asset back credit facility you could lose the assets that you put up as collateral if for any reason you are unable to meet your payments additionally since lombard credit is loaned against the value of the collateral you can expect the bank to demand additional collateral if the value drops for instance a loss in value of your securities below the agreed upon loan to value of the credit facility this is known as a margin call and it's especially important to understand during times of market volatility now with this in mind before using lombard credit you need to make sure you understand all the associated risks and what you stand to lose so make sure to speak with a qualified advisor before making any decisions so are you ready to access lombard credit if you want to know which banks offer lombard credit what their minimums and rates are what types of financing strategies are available to you and how to get started we can help all you have to do is join global banks insider with global bank's insider you get instant access to our entire archive of banking intelligence reports access to the global bank's database home to more than 250 banks from 50 plus countries including detailed bank profiles client preferences and a whole lot more finally you'll get real-time analyst support from our team of experts ready to answer your most pressing banking questions and to make suggestions on which banking strategies will work best for you to meet your objectives to get started just click the link in the description below to learn more about global banks insider and before signing off don't forget to hit subscribe so you get alert every time we share new banking opportunities thanks so much for watching and i'll see you next time you