What is a Stock-Secured Loan?

There are many different types of collateral that can be use to locate a secured loan. Secured simply means that you have placed collateral and agreed to forfeit that collateral in case you cannot make your payments and default. Secured loans are typically less expensive than unsecured loans because the borrower assumes the majority of the risk.

Stock secured loans use the original certificate of a stock as collateral. Most banks and lenders have a standard loan to value ratio on a stock certificate. For example, some banks will loan up to 75% of a stock's original value; others may only offer 50%. The loan to value ratio often depends on the type of stock you are using and the economy at the time.

Another factor used with stock loans is which exchange the stock trades on. Many lenders will only collateralize stock that trades on certain exchanges, such as the New York Stock Exchange. In order to seek a stock-secured loan, you need to understand which stock is eligible with which bank. 

 


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