Stock Loan Fee: What is the Cost of Borrowing?
Global securities lending is booming. It reached a whopping $2 trillion last year.
Stock loans are common and can be a great way to diversify risk.
Here’s everything you need to know about the fees associated with doing a stock loan and how it impacts cost so that you can make the best decision:
The True Cost of Borrowing
As with any investment, you’re going to pay fees. A stock loan fee is what is charged in accordance with a securities lending agreement.
It’s important to fully understand what your agreement says before you do a stock loan.
Stock market investments are among the most preferred investments for Americans — 52% say they have money invested in the stock market.
Stock investments are especially beneficial for those who want to invest in for the long term. Instead of worrying about every downturn the stock market takes, you can ride them out comfortably, knowing that the nature of the stock market involves ups and downs.
There are several advantages to using a stock loan.
First of all, they’re non-recourse loans. In other words, you are not personally liable for the loan repayment and it will not affect your credit rating. Also, depending on which lender you use, you can select terms and interest rates that match your needs.
Before moving forward, you need to be aware of how fees impact you.
Understanding the Stock Loan Fee
Lenders generally charge between one percentage point (1%) up to eight percentage points (8%) as a fee to lend money. So if you are borrowing $ 200,000 against your stock loan portfolio and being charged 2 points that would equal $ 2,000. Its important to ask what are the points you will be charged to borrow the money.
How We Can Help
Stock Loan Solutions offers over 58 years of combined experience in securities lending and the stock market.
Contact us today so we can help you with your next stock loan and lower your cost of borrowing!