Online Lenders Who Give Stock Loans
Stock based loans are programs that allow investors to pledge fully paid stock as collateral for non-recourse loans from third party lenders. Marketing of stock based loans is done by financial planners, insurance agents, accountants, attorneys and investment advisers. As a way to raise cash by customers, financial professionals offer stock based loans in order clients to buy other financial products. Customers can acquire stock based loans from financial professionals who sell without requiring the existing stocks of the clients.
In addition the stock based loans can be sold to clients for the purposes of buying new stock and borrowing against the stock to make another investment. Other investments that are done buying or borrowing stock based loans includes annuity.
Different promoters offer stock based loans that last depending on the features provided. An investor pledges their stock as collateral to lenders to about ninety percent of all they have. Clients pay interest on the loan acquired based on the set period of time. Dividends are credited to the stock of clients basing on their pledges. The interest charged on a client is usually ten percent and above.
When a stock based loan is over, a client is given several options to choose from in conjunction to the loan. Getting the stock back, walking away from downside losses, extending the loan and cashing any upside profits are the options provided to clients upon ending of their loan period. A client is able to get their stock by paying off the loan balance including the interest and less any dividend paid.
Another option is extending the loan as customers are allowed to renew the loan for an additional time period. A client can also walk away from the downside losses upon the end of their loan period. A client walks away from the loan when the value of the pledge stock falls below the amount the customer owes. In the process of walking away the client turns over the stock to the lender and keeps the money that had been loaned. Lenders can’t try to recover any of the loaned amount or interest from the customer. Cashing of any upside profits by clients is resulted if the value of the pledged stock has increased above the total amount due on the loan. The amount due on the loan also includes the interest.
Investors need to be aware of the risks and considerations for stock based programs. Investors needs to consider the following risks; premature sale of stock, possible tax consequences, failure to perform by the lender, availability of the funds to repay loan, unregistered sales, possible conflicts of interest, high cost and high interest charge among others.