Pledged Share Stock Loan

If you’ve ever thought about pledged share refinancing your share portfolio but were scared of the heavy lifting, chances are, you have been missing out. When the average stock portfolio holder can release cash from their existing portfolio at rates of around 3% thats not something to be sniffed at – don’t you think it’s time to stop stalling and consider your stock portfolio refinance options?

There are generally two motivations for people to refinance their share portfolio – using the money to purchase another asset and pulling out equity from their stock portfolio to re-invest–  you needn’t wait for these justifications to consider getting a loan to leverage your portfolio in a bull market.

One motivation is internal – I want to acquire more assets – and the other is external – we want to do something, such as renovate or go on a holiday or pay off debt. So, the stock portfolio owner looks to stock loan brokers to see if there is a way to pull the equity out of the share portfolio by refinancing.

Considering most stock portfolio owners never leverage up their stock portfolio its amazing how many investors are missing out on be able to take advantage of the good times using reasonable leverage of their share portfolio or even single stock portfolio.

What happens after a few years is your loan situation changes. Your stock portfolio value goes up in value and you have a better loan to value ratio.

Many investors do not realize the power and advantages of refinancing their existing stock portfolio using a pledged share stock loan but there are lenders out there that will happily provide the lending they require either for re-investment into the markets or for any other asset purchases they may have in mind.

Understanding Pledged Share Stock Loan

When loan stock is being used as collateral, the lender will find the highest value in shares of a business that are publicly traded and unrestricted; these shares are easier to sell if the borrower is unable to repay the loan. Lenders may maintain physical control of the shares until the borrower pays off the loan. At that time, the shares would be returned to the borrower, as they are no longer needed as collateral. This type of financing is also known as portfolio loan stock financing.

Pledged Share Stock Loan Risks to Lenders

Since the price of a share can fluctuate with market demand, the value of the stock used to secure a loan is not guaranteed over the long term. In situations where a stock loses value, the collateral associated with a loan may become insufficient to cover the outstanding amount. If the borrower defaults at that time, the lender may experience losses in the amount that is not covered by the current value of the shares being held. Because stock prices can even drop to zero, or the company might go bankrupt, loans collateralized in this way can theoretically result in a completely uncovered loan.

Issuing Business Concerns Over Pledged Share Stock Loan

The issuing business of a stock used to secure a loan may have concerns regarding the outcome of the agreement. If the borrower defaults on the loan, the financial institution that issued the loan becomes the owner of the collateralized shares. By becoming a shareholder, the financial institution may obtain voting rights in regards to company affairs and becomes a partial owner of the business whose shares it possesses.

Click here to apply for a pledged share stock loan or to find out more information from one of our stock loan brokers.

By on October 29, 2021   /   Blog  
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