Securing Personal Loans by Stock: How It Works

Securing Personal Loans by Stock: How It Works

Navigating the tricky world of money borrowing can be an exhausting, arduous process.

Without much knowledge of the inner-workings of the personal loan industry, it can be easy to get swept up and agree to contracts that may not actually be in your best interest.

So when you are in need of extra funds, don’t forget that there are options available to you that you may not yet be aware of.

A great but lesser known route to financial support? A personal loan secured through stock.

What Is a Stock Loan?

A personal stock loan is a non-recourse loan secured against shares of non-marginable securities. Essentially, that means that you can borrow money on your own personal stock.

When you work with big banks, you typically need to provide some form of collateral. Common assets used for this purpose are homes, valuables, vehicles, and property. But with a personal stock loan, you can borrow money against the investments you already have made and the stock you already own.

The Process

When you opt to go with a personal stock loan, you essentially transfer your stock and begin to make interest payments. The interest is paid throughout the lifespan of the loan. During that time, the holder will be provided with a loan determined on the value of your stock. With stock loans, you can typically take out a non-recourse loan that is as much as 90% of the monetary value of the total value of your combined stocks.

This is a smart way to borrow money, because if the borrower were to default, none of the possessions will be lost. And if the value of the stock declines, the borrower can walk away without any lasting damage to credit.

Once the loan is fully repaid, the stock will be transferred back to you as if nothing ever happened. For the small price of interest alone, you can have quick access to the money you need when you need it without going through the hassle of selling your stock. And at the end of the day, you still have ownership of your possessions.

What are the Benefits of Personal Stock Loans?

One of the main perks of a personal stock loan is the quick access to money when you need it without having to sacrifice ownership over personal belongings and investments. There is much less hassle and risk with this type of loan deal than there would be with an arrangement through a big bank, because you are borrowing money against your own stock.

This type of loan is one of the only instances where the borrower does not have personal liability for the loan. These loans are also typically more straightforward agreements with less chance of convulsion or backhanded trickery.

As such, it is a low-stress money borrowing process on all ends. And with no damage to credit or corporate worthiness, a personal loan secured by stock is a great option for folks at any point in their life.