Ask most people what limits how much you can borrow against a stock portfolio, and they will say 50%, the number tied to margin lending since 1974. That number is real, but it applies to a narrower category of loan than most people assume, and the loans that actually dominate wealth lending today, securities-based lines of credit, are usually structured specifically to fall outside it.
The regulation doing the work here is Regulation U (12 CFR 221), the Federal Reserve's rule governing credit extended by banks and non-broker-dealer lenders that is secured by margin stock. Regulation U draws one line that decides everything else: is the credit "purpose credit" or "non-purpose credit"?
The line that actually matters
Purpose credit is any credit, secured directly or indirectly by margin stock, used to buy or carry margin stock, immediately, incidentally, or ultimately. Buy $500,000 of stock with a loan secured by other stock you already own, and that is purpose credit no matter how the paperwork is worded.
Non-purpose credit is a loan secured by margin stock but used for something else: a house down payment, a business investment, a tax bill, a divorce settlement, anything that is not buying or carrying securities.
Regulation U's 50% maximum-loan-value cap applies only to purpose credit. For non-purpose credit, the Federal Reserve places no restriction on the amount of credit a bank may extend against margin stock at all. Read that again: the regulation most people cite as the reason securities-based lending (SBL) lines top out around 50% does not, in fact, apply a percentage cap to the majority of the SBL loans actually being written today, whether structured as a securities-backed line of credit (SBLOC), a pledged asset line (PAL), or an LAL, because those products are structured as non-purpose credit from the start.
This is not a loophole discovered by clever lenders. It is the explicit design of the regulation: the 50% cap exists to limit leverage flowing back into the stock market, the specific systemic concern Regulation T addresses for brokers and Regulation U addresses for bank lenders. A loan that funds a home purchase or a business, rather than more stock buying, does not create that particular risk, so the Fed did not cap it.
Why lenders still don't lend you 100%
None of this means a bank will actually advance you close to the full value of your portfolio on a non-purpose line. Every lender in this space sets its own advance rates by collateral type, typically well below any theoretical ceiling, as ordinary risk management: concentration risk, liquidity risk, and the lender's own capital requirements all push advance rates down independent of what federal law technically permits. See this site's advance-rate and haircut guide for how that plays out by collateral type in practice. The absence of a federal cap on non-purpose credit is a necessary condition for SBL's advance rates to be competitive; it is not, by itself, what sets any specific number.
The paperwork that keeps this honest
A bank lender must obtain a completed FR U-1 purpose statement from the borrower for any loan secured by margin stock exceeding $100,000. The form records the loan amount, the stated purpose, and the pledged collateral, giving the lender a documented basis for classifying a given loan as purpose or non-purpose, and giving bank examiners something concrete to check later.
That check matters because misclassifying a purpose loan as non-purpose specifically to dodge the 50% cap is a real, examined compliance failure, not a gray area a lender can quietly exploit. This is the actual reason SBL agreements tend to be explicit and restrictive about what the loan proceeds cannot fund: using a non-purpose SBL line to buy securities does not just risk a margin call, it can put the loan's own regulatory classification, and the lender's compliance posture, in question.
How this compares to Regulation T
Regulation T governs the other half of this world: credit extended directly by broker-dealers, most commonly ordinary margin loans used to buy securities inside a brokerage account. Reg T sets its own 50% initial margin requirement, meaning a broker can lend up to 50% of a margin-eligible security's purchase price. It is a similar headline number to Regulation U's cap, arrived at through a different regulation, a different regulator relationship, and applied to a different category of lender. This site's SBL-vs-margin comparison covers how the two products diverge from there, particularly on what happens when a loan goes underwater.
What to ask your lender
- Is this specific loan structured as purpose credit or non-purpose credit under Regulation U, and is that stated explicitly in the loan agreement, not just implied?
- If it's non-purpose credit, what specific restrictions does the agreement place on how I can use the proceeds, and what happens if I violate them?
- Did the lender have me complete an FR U-1 purpose statement, and do I have a copy?
- What advance rate is the lender actually offering against my specific collateral, and how does that compare to what similar lenders publish for the same collateral type?
- If I have both a margin account (Reg T) and a separate SBL line (Reg U) at the same firm, how do the two accounts' collateral and liquidation rules interact if both are under pressure at once?