The Benefits of Getting a Stock Loan
One of the types of loans that you can get if you need money to fund you home, business, and other assets that need finances is a stock loan. Stock loans are different from other types of loans which require a property collateral before you are approved. This is a type of loan that requires collateral in the form of any free-trading securities. 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. You only need to wait for a week after you have submitted the required paperwork for the loan. 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. If you are a non-US resident, you can still acquire a stock loans since selected securities from different countries are also allowed.
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. Or, you can simply walk away from your loan. You leave the collateral with the lender. A stock loan is non-recourse, and this means that the borrower is not personally liable. There will be no effect on the borrower’s credit rating.
During the terms, if your stocks earn dividends, interests, and appreciations, it will still go to you. If the borrower decides to forfeit the collateral, then the title of stock ownership changes and becomes the lender’s. 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.
This type of loan does not need to be reported to the credit bureau since there is no public record exists for this financing. Stock loans are not taxable since they are not constructive sales. If you check the Internal Revenue code, you will find this an exception.
Getting a stock loan is less risky since securities value changes from time to time. If you get a stock loan, you are at an advantage since the interest is paid quarterly. A higher stock value will be beneficial to you if you pay the outstanding loan cost or simply walk away to minimize loss.