Comparing Stock-Secured Loans and Savings-Secured Loans

Secured loans use collateral in order to receive financing at relatively low costs. There are many options for assets to use for a secured loan including homes, businesses and automobiles. Aside from these traditional forms of collateral, using your savings account or your stock certificates to secure a loan may be an option. These options allow you to get cash quickly without surrendering your savings.

Similarities between Stock-Secured and Savings-Secured Loans

  • Your asset, whether in the form of a stock certificate or cash in an account, is placed on hold with the lender
  • You use the gains of your asset to offset the interest rate of the loan
  • You will receive a loan to value less than 100% of the value of the asset, meaning you will always risk more than you receive

Differences between Stock-Secured and Savings-Secured Loans

  • The type of asset used is obviously different; a stock-secured loan uses an outside asset and a savings-secured loan uses an asset within the lending institution
  • Stocks are riskier than savings accounts, meaning they can have a higher rate of return while on hold with the lender, making your loan cheaper, or can totally deplete in value, making your loan more expensive
  • Stocks are more flexible than savings accounts which have more set terms at the beginning of the investment

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