A stock loan does not work in the same way as a mortgage loan even though they can both be used to purchase a real estate. With the stock loans, instead of the real estate, stock portfolios like bonds are the ones that get used as collateral. The quality of your stock portfolio is what will determine the amount of money you can borrow. You are required by the lender to move the investment of the amount that you want to get against the institution to get a stock loan. Instead of moving the whole portfolio, you are just supposed to use a portion of what is necessary as the loan security.
Comparing with the mortgage loan, stock loans has a lot of benefits. Qualifying for the loan depends only on the quality and the amount of your investment. Things like credit history, income level, or property value will not be needed. Therefore, rather than borrowing the old subprime or stated income loans, it is better to acquire a stock loan. It is also a good alternative for a person who is unable to finance their mortgage due to lack of equity. The rate at which you can get a stock loan is also higher than that of borrowing a mortgage loan.
The reason for this speed is because no credit underwriting or property appraisal that is needed. Flexibility is also another benefit that comes with the stock loans. You are allowed to get as much credit as you can. Whether you want to finance a residential or a commercial real estate you can use a stock loan. The loan amount can fund the kind of properties that a mortgage loan cannot. If you are unable to make your payments, the lender will not try to recover your other assets, and that is the significant benefit with the stock loans.
This means that they will only keep the collateral and nothing else. Your stock portfolio remains the same with the stock loans. It could be that you have contemplated selling your portfolio to buy a part of real estate. By the use of a stock loan, however, you can still be able to participate in the profits and losses. You will also not have to incur any capital gains tax even if you liquidate your bonds or stocks. This is still a loan like any other, and there are risks of losing your asset. It can also be risky if you continuously keep changing the stock values. Nonetheless, there are very minimal risks that a stock loan carries. A stock loan is also full of benefits that you as the borrower gets to experience.