Benefits of Stock Loans
Loans are essential because we use them when we urgently need cash. There are specific loans for building a home or starting a business. With the continued development of technology there has been an increase in the number of options an individual can use to access loan funding. It is important to note that you can easily get a loan using your stock as collateral and you don’t need to apply for a bank loan as the only source of getting of money. The stock loan amount is dependent on the characteristics of the shares collateralized including the number of shares, price, volatility and other criteria.
Stock loans use shares as collateral and will give you a loan amount based on the value of your shares. The amount of the loan you qualify for will be determined by the value of your stocks. Once an investor has completed the payment of the loan, the stocks are transferred back to them. Stock loans are important because it provides a sure technique an investor can use to get money quickly and it is private and confidential. There are many advantages of stock loan apart from the ones stated above. This article highlights some of the key benefits of a stock loan over other types of loans.
The first benefit of stock loan is that it has one hundred percent limited recourse transaction. If the investor defaults payments of the loan by nonpayment of the agreed interest amount, the borrower simply takes the shares with no further personal obligation. Stock loan will not interfere with your personal credit ratings because there is no personal liability in case you default payment.
The second advantage of stock loan is that you will receive the money quickly as opposed to loans from financial lending companies and banks. When asking for a loan from the traditional bank it will take many months because the banks need to verify a lot of information before issuing the credit. With the stock loan, you can be sure of getting the money in a few days because all you need to is the stocks and the loan is approved. With stock loan there is no need for a credit report and credit review because the only collateral required is the stocks. Because of fast cash availability and no personal liability many investors prefer stock loans as opposed to the banks’ loans.
The third reason why you should apply for a stock loan is that they are flexible. When applying for a bank loan, you need to have a business plan with details on how you are going to use the loan amount.