Stock Loan – A Loan Against Securities

By Carmen Galt

The tangible benefits that come with securing stock loans through a specialist are numerous. Having an expert to talk with will provide the tools to make the right decisions with the highest potential yield in return. Money decisions are not ones to take lightly, but the peace of mind and knowledge that will be provided through a securities lending specialist will prove immeasurable. The current securities lending programs that are available are non-recourse stock loans and interest only loans.

Stock loans, which are common shares used as collateral to secure a loan from another party, have a fixed interest rate, and can be secured or unsecured. Interest-only stock lending has a very low interest rate of just 3-5%. With the help of a specialist, the possibility for high returns is very possible, and can reach up to 50-70%. The unsecured stock loan is based on the stock value, and the principal is due at the maturation of the loan. Incredible flexibility is build into this type of securities loan, and the non-recourse element makes it relatively risk free.

What is a non-recourse stock loan? This is a type of loan against securities that provides an extra safety net for the borrower without sacrificing the potential for short or long-term revenue gain. Basically, a non-recourse securities loan is based on the collateral of the borrower’s stock, and allows the borrower to benefit from their own stock value and retain it once the loan matures and is paid off. The best part of this type of stock lending, and the element that provides the extra safety net, is that the borrower is completely immunized against unexpected financial loss. This means that the borrower is only responsible for the original value of the collateral stock, and is not responsible for the difference if the value falls below that magic line. Should the borrower choose to default, his or her credit rating is not impacted.