What are non-recourse stock loans and how do they work?

What are non-recourse stock loans and how do they work?

Non-recourse Stock Loan

A non-recourse stock loan is a type of loan favored by many investors and possibly the best way for you to raise the funds you need. Providing capital to investors while still letting the investor maintain their assets is one of the main reasons a non-recourse stock loan is used to raise capital in many situations.

Non-recourse stock loans let the borrower pledge collateral, in the form of securities, in return for capital upfront. This way, borrowers can retain the securities that they pledge as collateral instead of selling the securities to raise the needed funds. This is advantageous because you will avoid paying tax burdens that you would incur if you sold the securities outright, also while still accumulating interest on the appreciation of those assets you pledged.

If you are considering a non-recourse stock loan, you should be aware of how they work and some of the additional possible benefits they have.

Benefits When You Are Borrowing Money

One benefit is with a stock-based loan you are limited in the amount of personal collateral that is put at risk. If you default on a non-recourse stock loan, the only thing that is at risk of being seized is the assets you pledged as collateral, in this case, securities. You will never be at risk of losing any other assets if you default because it is a non-recourse loan, this limits the risk to borrowers while still giving them access to much-needed capital.

Another benefit when you are borrowing money with a non-recourse stock loan is you will be capable of borrowing a percentage of the total value of the assets you intend to pledge, every lender has different borrowing and collateral standards that should be considered carefully.

This gives you the ability to borrow more money than you may traditionally be capable of borrowing through other lenders. With a stock-based loan, your eligibility is not affected by your income or even your credit, two things that will affect your borrowing power significantly through a traditional lender.

If you borrow money via a stock-based loan, you never lose ownership of the assets and avoid tax implications of selling the assets. Technically a stock-based loan can result in your profiting from the loan if the borrowed funds are used wisely. If you have something useful for the funds you are borrowing, such as prospective investments, you can possibly return a profit over the expenses of the loan. This would be an example of leveraging your portfolio assets, one of the most important strategies available to investors.

At the end of your loan if you have kept up on payments and maintained your account in good standing you will get the assets back with no additional fees or implications. You can then apply for another loan, which should be easier and a more seamless process for repeat borrowers.

We Strive to Provide Competitive Interest Rates

At Easy Stock Loans, we understand you may have questions or concerns when seeking to raise capital against your securities. We have tried to answer all questions and mitigate any risk through a transparent process and information provided on our website. We strive to provide competitive interest rates and flexible terms so you can maximize your benefits from the loan. If you have any other questions not answer yet or you would like to discuss your options for a stock based loan you are encouraged to contact an Easy Stock Loans representative today.