Importance of Stock Loans
Loans are important in everyday life because they help us sort out our urgent financial needs. There are loans for business expansion and for buying a home. With the development of technology there has been an increase in the number of avenues an individual can use to obtain a loan. 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 amount of loan you qualify for using the stock loan program is determined the characteristics of your stock such as the number of shares, the price and the volatility of the securities.
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 lender will be able to give you loan amount as per the value of your stock. Once you have completed payment of the loan amount plus interest, the stocks will be given back to you. Stock loans provide a reliable, safe and completely confidential access to loans based on the value of the underlying securities. Apart from this there are many benefits of stock loans. 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. With a stock loan you can default payments without hurting your credit ratings since the lender will only seize the stocks. Stock loans do not interfere with your credit score and there is no personal guarantee required apart from using shares as collateral.
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. Stock loans do not need credit report for the approval process all the lending company will ask is the number of shares you want use as collateral. This makes stock loan the best alternative for many investors who need money fast because it is processed within a matter of days.
The third advantage of stock loan is that it is flexible compared to other types of loan. 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.