If you are someone who has worked hard, and have gained significant equity in the stock earned through your job, it may be beneficial for you to borrow against the equity value of your stock. These funds can be used to deal with emergencies, pay outstanding bills or to take advantage of another investment opportunity. Depending on the lender, you can borrow $10,000 or more. For some lenders, the minimum loan available is $100,000.
Securities Loans
Securities loans are personal loans made against the value of your stock. You cannot borrow money against your stock until you are vested in your equity stock benefit plan. Four-year vesting provides the full value of your stock over a four-year period, and cliff vesting provides you with full value after a period of time specified in your benefit plan, such as two or three years. Once you have earned sufficient ownership in your stock, you can then take out a loan against its value.
Margin Loans
If you are someone who is able to accept some risk, a margin loan may be a good way to use the value in your portfolio to pay off a mortgage, or go someplace you have always wanted to visit. Since the risk in margin loans is related to the fluctuation of markets, your broker will send you a margin call when the value in your portfolio drops below the minimum amount required by law to secure your loan. If the value of your stock increases, the net gain can be used to pay the interest on your loan.
Non-Recourse Loans
Non-recourse loans allow you to get your money with no documentation beyond the paperwork necessary to process your loan. You can use the proceeds from the loan for any purpose you want. There is no credit check, no income verification or no employment verification needed to obtain the loan. The securities in your portfolio are the only collateral for your loan. If you default and walk away from your loan for any reason, the only recourse the lender has to recoup the debt is to take possession of the securities pledged as collateral.
Loan Details
The funds may be sent to your checking account within 24 hours. The current market conditions will determine the value of your portfolio. Margin and securities loans usually allow you borrow up to 50 percent of your portfolio value. Non-recourse loan companies may allow you to borrow up to 85 to 95 percent of your stock's value. Interest rates for loans based on your stock's value may be as low as three percent, but may be as high as eight percent. Most lenders provide variable payback periods.
References
Writer Bio
Kenneth Oster's leadership experience includes an Air Force career, pastoral leadership, and business ownership in the automotive repair industry. He has a MBA from Western Governors University, and is working toward a DBA degree from Northcentral University. Oster authored the book, "The Complete Guide to Preserving Meat, Fish and Game: Step-by-Step Instructions to Freezing, Canning, Curing and Smoking."