Finance's Biggest Secret: Using Other People's Money Really Is Possible

Hello James,

It has been some time since I last sent you a message, so first I want to send my greetings.

Life has been very fulfilling recently, and work has also been very busy. Our whole family has been doing health checkups every six months for a year. Everything is normal, and the doctor told us that once a year will be enough going forward.

Recently I would like to report two things to you related to bank financing.

1. Stock-collateral loans

Recently, because brokerages have been affected by capital adequacy ratios and credit-line limits, both new loans and refinancing old loans have become more difficult.

Although my loan is not due until the middle of next year and there is no immediate issue, I have already begun preparing ahead of time for the future. So I once again researched stock-collateral loan services offered by banks.

At present, I understand that CTBC Bank, Union Bank, Taishin Bank, and Cathay United Bank all provide related services, with interest rates around 2.7% to 3.0%. In the end I chose Union Bank, mainly because I had dealt with them before.

After studying it again, I unexpectedly found that as long as the stocks held meet the bank's approved standards and can be pledged, in theory it is possible to use bank funds over the long term through continuous renewals and capital management, provided that interest is paid normally every month. Although it is still somewhat different from the U.S. model, it is already quite close.

I contacted Union Bank's corporate finance department. Although they mainly serve corporate clients, they can also handle personal stock-collateral loans. For the first application, the maintenance ratio must be above 200%, and the first drawdown must be at least NT$10 million.

After that, annual renewals have no limit. Basically, as long as the repayment record is normal, the bank has no reason not to renew the loan. This is what the officer personally told me.

The bank charges some setup fees, about NT$4,000 to NT$6,000, while CTBC is NT$20,000, but the amount is not high and can be ignored. I submitted the application to Union Bank last Friday, and the process is expected to take about three weeks. Based on my current stock positions, I applied for a NT$45 million credit line.

After the line is approved, I can use bank funds to replace the brokerage stock-collateral loan. Once the whole process is completed, I will report back to you.

2. Personal credit loan

I also filled in the last missing piece of the bank credit-loan puzzle.

Because I do not have tax-filing records in Taiwan, I could not provide the salary or employment proof that an ordinary employee would provide. Instead, I used the stock assets in my account and the cash-flow records with the bank as proof of financial strength for the bank's review.

I submitted the application on June 10. That same afternoon, the bank called to verify the information and directly approved me for the maximum amount of NT$8 million. On June 11, the funds were disbursed. The speed was faster than I expected.

For the first three months, the interest rate is 1.68%. From the fourth month onward, it is 2.99%. The setup fee is NT$9,000. Calculated over one year, the cost is about 2.6%, which is really cheap.

After the funds arrived, I first set aside about NT$1.25 million, equal to one year of principal and interest payments, and directly bought 00865B. The remaining funds were invested in batches into 00662, 0056, and QQQI. I bought immediately and built the position all at once.

My thinking is simple: if it falls afterward, I accept it, because this is long-term holding. There is no need to struggle over whether to keep waiting. After one year, CTBC will proactively ask in the twelfth month whether I want to borrow new funds to repay the old loan.

Finally, I still want to thank you for your guidance and support all along. I am very grateful to have the opportunity to keep learning by your side. Because of your inspiration, I can continue exploring different financial tools and asset-allocation methods and move forward steadily.

In investing, we must keep believing in ourselves. Everything else can be left to fate.

Wishing you good health, peace, and smooth days.

James

James's Reply

You are truly impressive. You were able to find solutions and gain a deeper understanding of how Taiwan's financial system operates.

I want to share some of your key insights with others, so they can also learn from your financing strategy and knowledge.

In finance, it is possible to use other people's money and build wealth with very little capital of your own. How much you can use, and how much wealth you can create, ultimately depends on the depth of your knowledge and how much effort you are willing to put in.

Best regards, James

Disclaimer

All email content, video content, and replies are for reference only. I am not a professional investment advisor, nor am I a professional tax specialist. All information is only a sharing of personal experience. Please invest cautiously. You are responsible for your own investments, decisions, and actions.

Written by James.

PS: Additional Notes

Summary of the discussion:

This discussion mainly centered on bank stock-collateral loans, credit financing, and the differences between bank and brokerage stock-collateral loans.

1. Differences Between Bank and Brokerage Stock-Collateral Loans

• Bank stock-collateral loans and brokerage stock-collateral loans are not exactly the same in nature.
• Banks evaluate the client's asset size, credit condition, and repayment ability.
• As long as the stock meets the bank's approved standards and the client is in good standing, the bank is usually willing to continue renewing the loan:
• Interest is paid normally.
• The maintenance ratio is normal.
• The credit record is good.

In other words, banks place more emphasis on the client relationship and repayment ability, while brokerages place more emphasis on collateral value and the maintenance ratio.

2. The 72-2 Clause Restriction on Home Loans

Question: "What does it mean that home loans are restricted by 72-2?"

Additional explanation:

The 72-2 clause mainly restricts:

• Developers
• Real estate lending
• Land financing
• Home loans

The total amount of bank lending must not exceed a certain ratio.

The purpose:

• Prevent a real estate bubble.
• Reduce bank risk.
• Avoid overconcentration in the real estate market.

Therefore, affected items include home mortgages, developer financing, and land-development financing.

Unaffected items include stock-collateral loans, personal credit loans, and general corporate financing.

So it was specifically pointed out that if the application is for working capital, stock-collateral loans, or general financing, it is not restricted by 72-2.

3. Banks Actually Want Good Clients to Keep Borrowing

CLEC group members further shared that banks screen clients.

Truly high-quality clients usually have:

• Large assets
• Stable cash flow
• Good credit
• On-time interest payments

These clients are very valuable to banks. Therefore, common bank practices include annual renewals, not requiring principal repayment, and keeping the credit line available.

As long as interest is paid, the maintenance ratio is normal, and credit remains normal, banks are usually willing to keep lending.

4. What Banks Really Earn Is Interest

Observation:

The bank's cash is actually its liability.

What banks most want to see is:

• Clients borrowing over the long term
• Monthly interest paid normally
• Stable cash flow coming in

For banks, the ideal client is not someone who borrows and quickly repays. It is someone who borrows for the long term and never defaults.

5. The Most Important Insight From the Conversation

This is also the biggest integration of CLEC's investment philosophy with how finance operates:

Traditional thinking: work hard to save money, buy assets, and pay off debt.

Financial thinking: build high-quality assets, let banks be willing to lend money, use bank funds over the long term, let your own assets keep appreciating, pay interest normally, and create a cycle where assets and liabilities coexist.

One-sentence summary:

Banks are not afraid of you borrowing money. Banks are afraid they cannot find high-quality clients who are willing to pay interest over the long term and have good credit.

For investors, once you have high-quality assets and good credit, borrowing is no longer only a liability. It becomes a financial tool that can be used over the long term.