What is the Lombard credit?

The Lombard loan is a loan with a maximum horizon of 4 years and at a fixed rate, granted by a financial institution in return for the pledge of liquid assets (stocks, bonds, etc.).

The amount borrowed via the Lombard loan represents a percentage of the value of the pledged financial assets.

The principle: the higher the asset pledged as a risk of loss of value, the lower the percentage.

For example, life insurance composed mainly of units of account allows the investor to benefit from a credit of 40% to 50% of its value. An asset considered to be safer (a life insurance contract investing in a euro fund for example) gives the right to a credit of up to 100% of the value of the latter.

During the collateralization period, the borrower still receives interest and dividends from the pledged assets.

If the borrower repays the loan amount at maturity, he recovers the pledged financial assets. On the other hand, if there is no repayment, the assets become the property of the lending bank.

The main interest of the Lombard loan lies in the possibility of retaining its securities portfolio and receiving the benefits, while using the borrowed cash to make a new investment and thus benefit from significant leverage.

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