Whether you are a business owner needing to borrow money for your ventures, or you simply need some extra cash because you just found out that you are having triplets instead of just one baby, stock loans could be your saving grace for personal finance. They let you borrow the money that you need without putting your other assets, like your home, on the line.
For a lot of loans, you are required to have some kind of collateral. Usually, the collateral is a house, automobile, or other property that you could own. However, now borrowers have the ability to take out loans against the stock that they currently own.
Instead of gambling with your home or your way to get to work, you are able to put your stock up as collateral.
This is a game-changer for many people looking for a chance to start out their small business. But what exactly are stock loans and are they actually helpful?
What Are Stock Loans?
These loans can either be secured or unsecured, and some firms only process loan stock transactions. This means that investors are able to keep the stock that they own while still being able to get the money to be able to make all kinds of investments, such as building up a new business.
Securities lending has become increasingly popular, and it is easy to see why. Without the threat of losing a house or other property, the borrower is able to take his/her chances with their loan.
Since stockholders can take out a loan for as much as 90% of their total value of stocks, the worst thing that can happen if the borrower defaults is that they lose their stock—not their personal possessions.
Because the lender will have to do the same amount of work for both small and large loan amounts, most places like banks prefer when you take out larger loans. As such, finding a lender to give you a smaller loan may prove to be quite difficult. However, companies like Easy Stock work with various amounts of lending to make sure you are able to get what you need from your stock loans.
As with all loans, you have to be careful of the terms. Each stock loan has its own terms and interest fees, so be sure to look those over before you sign anything. Usually, this interest will be around 3 to 5 percent, and it can be paid monthly or as maturity in a balloon-style option.
Can They Help?
In short, yes. Stock loans can be very helpful to up and coming business people who want to venture out without worry that their family might lose their home if they were to fail.
The option to put your stock as collateral is helpful in giving those with no real ownership of things like homes and automobiles an option to have an economic gain.
However, any loan can be dangerous when you do not take it seriously. Things like stock may seem like they are not so bad to lose, but they could be a very important source of savings for you and your family. That’s why you should not borrow more money than you think that you can give back, plus interest.
Overall, stock loans are a great option to have in the world of loaning. As always, be careful with lenders so that you do not get taken advantage of.
As long as you are smart with your money, a stock loan can be a great way to get your business off the ground or to feed your growing family, when putting your home in the bank’s hands seems a little too risky.