In today’s volatile economic scenario, speculations and probabilities are really difficult to rely upon. Whichever are you look at be it employment, securities, stock markets, real estate properties everything looks to be in shambles. Predicting the future can be really tough. A lot of benefits enjoyed by the salaried person are fast moving away from them owing to the fact that companies are finding it difficult to survive and maintain their profit margins. Investments no matter where they are whether it is safer government bonds or the risky and the high return stocks, even the best of the experts fail to predict the market movements. In the light of the same, taking loans have also become a risky affair since they require repayments and if you are not sure of the future earnings things can headed for a tough situation.
When you are in need of some extra funds and are faced with financial trouble , loan against securities could be a viable option for you. These are really risky looking at the current state of the economy where markets are going up and coming down with each passing day and whether your securities against which you take the loans will retain their lives is under question. If one fails to return the loans within the stipulated time and as per the agreed time they are going to lose on the money that they will have to pay as interest rate. Also one can see their credit score getting affected in the process.
The stocks and the securities are used as collateral in the non-recourse stock loans. The borrowers benefit from the lower interest rates offered with these kind of loans. Borrowers are allowed to retain the value of the stocks and the gains in the course of time while they repay their loans. Once they are completely out of the short term loans, they can enjoy the complete ownership of the stocks and the securities under their possession and can also have the privilege of the getting interest rates of 3-5% of these loans.
Characteristics of the Non-Recourse Stock Loans
The loan rules out any kind of relationship between the amount taken as loan, collateral attached or pledged in relation to the same, stocks and even the credit rating. In the current scenario there are all the chances that your stocks might plunge in value. If it would have been the normal, loans the borrowers are required to pay the difference amount by which the value of the stocks goes down below the amount of loan taken. This means that the borrowers are set for a loss if the stocks devaluate once they have taken loans. In case of the non recourse stock loans there is no such obligation and the borrower need not pay anything to the lender even if their stock value plunges well below the value of the loan taken by them.
Why are they most Preferred Options
The most important fact related to any loan is the amount of time it takes to get approved and the kind of formalities and the documentation required in relation to the same. If we look at the non -recourse loans they hardly take any time for the approval process. All you need as documentation is the details of your investments and the lender will offer you a loan amount which will be a percentage of the total investment value that you possess. The approved rates are therefore very high and these are really preferred when we look at the other options used for the funding.
With huge competition in the sector, there are several options available. There are multiple brokerage houses which are willing to offer the loans against securities., In fact a lot of them convince the individuals into taking these loans to meet their needs and also make additional investment into the stocks.
Since this form of lending is secure, you have all the chances to negotiate the best deals which can be made available to you. Lower interest rates often attract the borrowers into reinvesting the loan amount into the stocks which offer high return to pay off the interest rates on the loans and still earn a lot of profit. However, this form of investments and money making drive has their own inherent risks and one has to be really aware of the different aspects related to the same before they actually go in for the investments into them.