What You Need to Know About Penny Stock Loans

What You Need to Know About Penny Stock Loans

Have you ever looked at the share of just one stock and thought investing was out of your realm of possibilities? Just one share of a prominent company might be the furthest stretch of your funds, creating what seems to be a giant obstacle to financial investment. 

That is where penny stock loans come into play. These stocks are a tool to help leverage a portfolio and reduce risk. Since they come in at a lower rate, it is typically more affordable than other financing options. Then, you can use penny stocks as collateral for loans to become more liquid and diversify your portfolio.

What is a Penny Stock Loan? 

Like the name implies, a penny stock trades for a small sum, typically less than $5 a share. The name arose during a time when it was possible to purchase for pennies on the share. For some, they might seem too small to turn a profit since they don’t trade as often as other stocks and typically don’t make it to the trade floors of major market exchanges. However, if done right, they bring in a significant enough return to justify the effort. 

Penny stocks can be used in securing a loan. Stock loans are the transference of stock with payment agreements on interest or other standards. In exchange, you receive a loan for the value of the stock. Once the loan is repaid, the stock is transferred back. 

What Are Penny Stocks?

Pros and Cons of Penny Stock Loans 

Penny stocks have quite a few benefits that make this OTC Market loan a great option. If you learn the market or lean on experts, you can take justifiable risks and watch as it rises in value. Growing businesses can take a loan against the capital of stocks and become more liquid to facilitate growth. The same goes for companies in need of extra cash quickly.

Stock loans also help with portfolio diversity. Utilizing a loan grants access to capital that can diversify the portfolio and other holdings in a creative manner. But like anything on the market, penny stocks can be volatile. For some, the risk associated with taking a loan against what could be a fluctuating value outweighs the benefits. 

Penny stock companies don’t tend to be on major market exchanges, can have limited profit, and can limited resources and operations. Choosing a loan with penny stocks as collateral means taking a leap of faith with a company that may or may not be successful. Success might take a while, so you may find yourself holding onto the stock and therefore the loan for a while. 

Another con is the lack of regulation around the assets of eligible companies. The Security and Exchange Commission (SEC) regulates companies with more than $10 million in assets and 500 or more registered shareholders. Since most companies are below that, it leaves stockholders feeling a little blind in their investment choice. The SEC has deemed penny stocks to be “speculative investments” and encourages consumers to understand the risks. 

Learn More About Penny Stock Loans 

If you are interested in a penny stock loan, get in touch with us to learn more about this powerful investment tool. The experts at Easy Stock Loans have the knowledge and resources needed to help you make the most of these loans. Contact a loan advisor today for more information.