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. With the stock loans, instead of the real estate, stock portfolios like bonds are the ones that get used as collateral. What will determine the amount that you can borrow, is the quality of your stock portfolio. 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. The quality and value of your portfolio is the only thing that will determine whether you qualify for the credit. The lender will not require things like credit history, income, or property value. Therefore, a stock loan is also better 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 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. 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.
This means that they will only keep the collateral and nothing else. Your stock portfolio remains the same with the stock loans. You might have considered selling your portfolio to purchase a piece of real estate. However, you can continue participating in the gains and losses by using a stock loan. 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.