Even if a stock loan does not work in the same way as a mortgage loan, they can both finance the purchasing of a real estate. Here, stock portfolios like bonds works as the collateral for the loan instead of the real estate. The quality of your stock portfolio is what will determine the amount of money you can borrow. The lender requires that you transfer the portfolio of the amount you wish to borrow against the institution so that you can get the credit. Instead of moving the whole portfolio, you are just supposed to use a portion of what is necessary as the loan security.
There are many advantages of borrowing a stock loan rather than a mortgage loan. Qualifying for the loan depends only on the quality and the amount of your investment. You will not be required to provide things like credit history, income, or property value. Therefore, a stock loan is a good option than the old subprime loans or stated income loans. For a person that is unable to fund their mortgage due to lack of capital, stock loans are a good alternative for them. The rate at which you can get a stock loan is also higher than that of borrowing a mortgage loan.
The stock loan is faster since there is no credit underwriting or property appraisal. The other advantage of stock loans is due to their flexibility. You are allowed to get as much credit as you can. It can be used to finance a commercial or residential real estate. With a stock loan, you can be able to fund any property that a mortgage loan cannot. The lender will not try to take your other assets if you are unable to make your payments and that is the most important thing about the stock loans.
It is only the collateral that gets, and that is all. With the stock loan, your portfolio remains the same. You might have considered selling your portfolio to purchase a piece of real estate. By the use of a stock loan, however, you can still be able to participate in the profits and losses. And if you liquidate your bonds or stocks for the purchase, you will not have to pay for any capital gains tax. However, you can again lose your assets since this is just a loan like any other. You should also avoid keeping changing the stock values since it can also pose another threat. 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.