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Getting Answers: 4 Common Questions About Stock Loans

January 03, 20243 min read

When you're short on cash and need to borrow money it can be difficult to know the best way to go about it. One option that many investors choose is to take out stock loans.

Not everyone knows this option is even available or how it works.

If you want to know more about stock loans and get the answers to 4 of the most common questions surrounding stock loans, keep reading.

What are Stock Loans?

Sometimes you need money but don't want to use your house or other personal possession as collateral. There are times when a loan against your car or house isn't feasible and you have to explore other options to get the cash you need.

Stock loans are a type of loan where banks use your stock shares as collateral on the money borrowed. Your loan would then be secured or guaranteed by the stocks you borrowed against.

This would mean if you had a $500,000 worth of IBM stock, you could borrow an amount usually for anywhere from 75% to 90% of the total stock value.

Stock or securities can be lent to one or more customers from a brokerage firm with hopes that it will be sold for less and a profit will be made. This is often done so that an investor can buy a block purchase of other more diversified investments or stocks.

Most stock loans are for anywhere between $50,000 to $100,000 and have lower interest rates and fees than your typical financing loan.

Loans can be taken out against stocks that a borrower owns but may also be facilitated through a broker or lending agent to borrow against stocks that aren't theirs.

What Are the Main Reasons to Get a Stock Loan?

Stock loans are most often used to facilitate another larger or more diversified investment. So a person that has a million dollars in one stock, borrows against it so that they can invest in different stock options.

Others will use stock loans to buy a house, real estate, or another personal or business investment.

Some will use a securities loan to avoid having to use one of these previous investments as their collateral. Thus lowering the risk of personal loss if something should go wrong.

What Are Standard Fees and Terms for Stock Loans?

Every stock loan is different and therefore the terms for each will be personalized to adapt to each unique situation. Many individual stock loans will have similar terms and rates with most being for two, three, or five-year terms.

Interest rates and loan fees tend to be lower with stock or security loans than with personal or business loans that are not secured or backed by collateral such as stock loans.

The interest on stock loans tends to be between three and five percent with four to eleven percent going to a loan origination and processing fee.

How Do Our Stock Loans Work?

We've got stock loans down to an easy to use and convenient process. Stock loans are all we do so we've gotten to be experts at it. You transfer your stocks to us, we transfer you the money. Once you've paid off your loan, the stocks are back in your possession and you have greater investments with less risk.

Invest in Your Future Today

Stock loans are a great way to invest in your future and make the deal you want, when you want, without worrying about all your money being tied up and your personal possessions being at risk if something goes wrong.

Connect with us today to learn more.

David

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