The Benefits of Getting a Stock Loan
If you need funding for your home, business, and other assets that need support financially, then one of the options you can take is get a stock loan. This is not the same as other types of loans which are based on property collateral. If you have any form of free-trading securities, then you will be able to secure this kind of loan. You will be able to loan 80% of the current value of your stocks at a fixed rate that you can pay from three to seven years.
Your stock loan can easily be approved even without any credit report, employment or income reports. There are paperwork that you need to submit, and your loan will be processed in about a week’s time. Even if you are currently jobless or self-employed, you can still apply for stock loan.
There are many types of collateral you can use for a stock loan including penny stocks, mutual funds, MTNs, bonds, foreign stocks, US treasuries, ETFs, and corporate bonds. Even individuals who are not residents of the United States can acquire this loan since they allow other selected securities from different countries.
If the borrower’s collateral stock falls under the 80% required value, then there are certain options he can take. You can make up for the deficit with cash or you can give another stock or security in order to make your loan valid again. Another option that one can take is to simply walk away from the loan. Your lender will now own your stocks or securities. A stock loan is non-recourse, and this means that the borrower is not personally liable. Even if you default on this loan, your credit rating is not affected.
During the terms, if your stocks earn dividends, interests, and appreciations, it will still go to you. Title of stock ownership changes once the borrower decides to forfeit the collateral. Failure of the borrower to pay on the due date would mean that he cannot benefit from the dividends anymore, but the lender will.
Constant changing of asset values can be the risk of anyone who gets a stock loan. A simple walking away from the loan is the best way to minimize your loss if the value of your collateral stock goes down.
Because there is no public record that exists for this financing, this type of loan does not need reporting to the credit bureau/ Stock loans are not taxable since they are not constructive sales. This is an exception according to the Internal Revenue code.
Getting a stock loan is less risky since securities value changes from time to time. One benefit of stock loans is that you only pay interest quarterly. A higher stock value will be beneficial to you if you pay the outstanding loan cost or simply walk away to minimize loss.