Real Estate News, Reviews and Investment
Article: definition of the term ‘stock loan’ and its uses.
It is possible to temporarily transfer the ownership of stocks, using them as collateral, in return for a loan of cash, securities or bonds. As the stocks act as collateral, they will be forfeit if the loan is not repaid.
Stock loans are primarily used by businesses and financial institutions, typically by traders making short sales. They can also be a way for a business to raise funds without ceding control of the company, for example by getting a loan secured against 20% of the company’s shares.
As with any loan, it’s important to fully understand the commitment being made. Issues to consider include: