How Does A Stock Loan Work?
A customer asked me before, "How does stock loans work?" the stock loan works so much different from a mortgage loan, on the other hand, it services similar purpose of financing the real estate. Rather than having a real estate as a form of collateral for the loan, the stock collection (bonds and other types of marketable securities can work) can also serve as a collateral. On the whole, the amount of cash you borrow is depending on the quality of the collection.
For instance, an assortment of highly liquid stocks like those registered on the S&P 500 will let you have a higher loan to value amount compared to an assortment of thinly traded stocks of penny. Loan to value percentages can run as high as 80 percent. One of the most crucial details of how stock loans work is that the moneylender will normally necessitate that you move the assortment of stocks that you borrow from the company. You don't need to move your whole portfolio - just a portion of it that you will use as a collateral.
Now that you already have an idea on how it works, you may be asking why would avail a stock loan rather than a mortgage loan. The stock loans have a lot of benefits. Qualifying for a stock loan is based on the quality and value of the portfolio. Property value, credit history and income play no role. Can stock loan be an alternative to state income loan? Definitely yes! Can this be an alternative to old sub-prime loans? Certainly yes! Can this also serve as an alternative for someone who is not able to refinance their mortgage because they don't have equity? Sure!
Another advantage of availing this kind of loan is the speed. If you play act that a stock loan and mortgage loan are horses, you will bet on stock loan to win the race 199 times out of 200. The reasons why the stock loan would win is because there are no credit underwriting or property appraisal for the borrower.
Another added benefit is the flexibility it gives. There are no amount limits for this loan. This can be utilized to finance an kinds of real estate, as a result, it can be utilized for commercial and residential loans. In addition, it can be utilized to finance properties that mortgage lenders will not touch.