Benefits of Stock Loans
Loans are important because it provides the urgent cash needed for an emergency. There are specific loans for building a home or starting a business. With the rapid development of technology, there have been many alternatives an individual can use to get a loan. Unlike in the past where loans could only be accessed in banks and other lending institutions, nowadays stock investors have another viable option they can use to get a loan. The stock loan amount is dependent on the characteristics of the shares collateralized including the number of shares, price, volatility and other criteria.
All you need to do when applying for a stock loan is to transfer your stocks to the lending company and agree to pay interest for every four months over the life of the loan. The amount of the loan you qualify for will be determined by the value of your stocks. Once you have completed payment of the loan amount plus interest, the stocks will be given back to you. It is important to note that stock loans allow investors to have access to loans that are reliable, safe and completely confidential. Apart from this there are many benefits of stock loans. This article, therefore, explains some of the advantages of the stock loan over other loan alternatives.
The first reason why you need to apply for a stock loan is that it has a non-recourse clause. 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. With a stock loan, you can be sure of maintaining your high credit ratings because it does not have personal liability.
The second benefit of stock over other loan types is that is processed quickly. The bank and other financial lending companies take several months before approving your loan request because they need to verify a lot of information. 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. Since you have the freedom of walking away from the loan at any time without affecting your credit score and the fast cash availability many investors like stock loans as opposed to bank loans.
The third benefit of stock loans 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.