Non Recourse Stock Loans

Non recourse stock loans are a great option for investors.

Stock Loans or Securities loans are loans against any publicly traded securities like stocks, bonds options etc. These loans are non-recourse meaning that if the stock's value falls below a certain floor amount, the borrower can walk away from the loan.


What is a Non-recourse loan?

A non-recourse loan is a loan that is secured by a pledge of a collateral, but the borrower is not personally liable.

If the borrower defaults on the loan, the lender is limited to holding only the collateral held for the loan - in this case, the lender will hold the stocks of the borrower. The lender bears a "loss" equal to the difference of the loan amount and value of the collateral.


Non Recourse Stock Loans

While Stock loans are very good tools to leverage money, there is always a chance that the stocks may fall below a certain floor level.

If the stocks fall below a certain floor level, the borrower can choose to walk away from the loan. There is no impact on the credit report and no public records.

However, if the borrower would like to keep his collateral or the shares, the borrower has the option of making a small payment to bring the loan balance above a certain floor amount.

Example Case When a Stock Drops in Value

If a borrower owns 1000 shares of AAPL at $200/share, he owns stocks worth $200,000. The borrower gets a loan of 80% or $160,000.

If the floor value is set at 70%, it amounts to value of AAPL shares falling to $140. If the AAPL shares fall to $140, the borrower can choose to walk away from the loan with the $160,000. The borrower then gives up his ownership of 1000 shares of AAPL.

To apply for a Stocks Loan, please complete the FREE Consultation for Stock Loans form.

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