The Benefits Of Stock Loans
When you need the bank to lend you some money they will ask you to provide a security for the funds loaned. Your home or car can be accepted as a collateral by the firm loaning you the money.
However, cases exist where a borrower may not be in possession of an acceptable collateral. However, a window has opened where borrowers can use their stocks to play the role of a collateral.
The quality of your stock portfolio is the factor that determines the amount of money that a bank can loan you. The lender will require that you transfer a stock value equivalent to the loan amount to them.
People are impressed by the advantages of stock loans hence preferring that approach over mortgage loans. Absence of credit underwriting from the lending firm is an attractive aspect of these financial instruments.
The decision to seek a loan emanate from a situation that has sprung up unexpectedly. The procedure of obtaining a loan in an ordinary setting is normally very lengthy and tedious. It normally very time and fewer procedures to secure a stock loan.
Flexibility is another factor that motivates investors to go for a stock loan. There are no restrictions regarding the loan amounts one can request. Lenders do not place limitations on the type of property you are financing with the loan.
In the event that the borrower defaults in his repayments, the lender does not resort to attaching his other assets to recover the debt. The only option is to retain the stocks that the borrower had transferred.
If the value of the stocks takes a beating at the exchange, a hedge is provided for the borrower to make a departure from the contract. His credit history is not dented as a result nor will the lender seek retribution.
During the lifetime of the loan, the borrower can still enjoy most of the benefits that are associated with his securities. He can take the advanced amount and seek for other investments elsewhere.
In a traditional loan processing, the borrower is required to give the bank details of the purpose for which he is taking out the loan. A borrower experiences more freedom when securing a stock loan and he is not required to give a reason why he is borrowing.
It is advisable to settle for stock loan broker who has broad exposure in issues that pertains to the stock loan procedures. It is recommended that you check the reputation of the agency in the industry.
You should only enlist the services of a stock loan firm that has been licensed to engage in its operations. Check if the agency you are engaging has a valid insurance cover in place.