The Benefits of Getting a Stock Loan
A stock loan is something you can apply for if you need financing for your home, business, and other assets that you need to support financially. Stock loans are different from other types of loans which require a property collateral before you are approved. You only need any form of free-trading securities to serve as collateral for the loan. The amount of loan you can get is 80% of the current value of your current stock which you can pay from three to seven years.
Approval of your stock loan is not dependent on credit reports, 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.
Even if your collateral stock falls under the 80% requirement, you can still take some options to still make it valid. 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. The collateral is left with the lender. There is no personal liability here since stock loans are non-recourse loans. The borrower’s credit rating will not be affected in any way.
During the terms, if your stocks earn dividends, interests, and appreciations, it will still go to you. It is only through forfeiting the collateral that the title of stock ownership changes. Lenders can benefit from the dividends in the event that the borrower fails to meet the payment due date.
Constant changing of asset values can be the risk of anyone who gets a stock loan. The best way to minimize your loss when there is significant devaluation of the collateral stock is to simply walk away from the loan.
Reporting to the credit bureau is not necessary for this loan since there is no public record that exists for this financing. There is no need to pay taxes of these loans since they are not constructive sales. If you check the Internal Revenue code, you will find this an exception.
The changing values of securities in the course of time makes stock loans a less risky loan. 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.