A loan is a type of debt where an individual or an organization lends money to be paid back over a period of time with an interest. Financial institutions act as the main providers of loans as well as banks and credit unions. Loans can be secured or unsecured where secured loans involve pledging an asset as collateral and unsecured are monetary with no asset used against the loan. Check out
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Loan stock is the lending of shares of stock or other types of securities to investors. The loan can be secured or unsecured. A secured
stock based loan can be turned to common shares in a accordance to already established stipulations with the stipulated conversion rate.
With stock loans, there is reduced the risk of losing money out of short-term market fluctuations because your stock is the collateral used and you have access to the short-term loan then repay as per the loan terms when your financial situation gets better.
Non-recourse stock loans allow the liquidity of investing in other alternative prospects because clients are able to borrow against a portion of the minority stake of the holdings. This makes it an effective and transparent solution to the uncertainty in the global markets.
Proceeds from sock loans may be used for a wide range of purposes except buying more stock, offering a great deal or flexibility. This enables a client to meet immediate financial obligations while still holding some of their stock. It is possible to obtain up to 80 percent of the value of the stock as securities loan whereas margin loans only offer a maximum loan limit not exceeding 50 percent.
The value of your stock might fall below the amount of your stock loan and still might be possible to keep the stock loan proceeds and relinquish the stock. Stock loans being non-recourse, the stock is the collateral the borrower's credit record is not at stake as well as their possessions.
A stock loan will allow the borrower to benefit when the prices of their stock go up. Most stockholders prefer stock loans rather than liquidating the portfolio expecting the stock will appreciate in time. Selling stock prematurely instead of letting them appreciate over time might result in serious losses. Stock-secured loans provide the cash needed for immediate or urgent financial needs without reducing the long-term value of their borrowers' investment while the clients capital appreciates. They also have a short processing time. Where most of the times it is not more than 7 days.
To read more about this, check out
http://en.wikipedia.org/wiki/Loan.