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A stock loan is a form of financing where people use their stocks as collateral for the loan. Therefore, the financing is a secured loan. As with any secured loan, a stock loan has the benefits of having better conditions than with unsecured financing.

With the majority of stock loans, people obtain a percentage of the worth of the stocks given as collateral as cash. In a lot of situations, banks are willing to give up to 85% of the worth of the stocks.

However, the most important factor in determining the money that you will be able to get from the collateral is the quality of the collateral. The quality of the stock is calibrated of in two distinct manners.

First, worthiness is calibrated by the general strength of the company behind the collateral. For instance, it is not the same to offer stocks from Apple as guarantee for the loan that offering the stocks from a little technology company who has just gone public. In this case, the more stable business has a track record that demonstrates the strong foundation behind the worthiness of the collateral.

Second, lenders want to see how liquid the collateral are. Liquidity measures how simple it is to sell the collateral of the company on a consistent basis. The more liquidity, the better conditions you will obtain in your financing.

For instance, there are hundreds of thousands of Wal-Mart stocks being bought and sold every day. Therefore, the collateral is very liquid because there are plenty of individuals interested in trading the stocks consistently.

lenders look at these two measurements of quality to decide on the conditions of the financing. As a matter of fact, they are the only things that they base their decision on. Banks will not even need a credit report. Therefore, credit is not a factor when obtaining this kind of financing. You could have a foreclosure in your history and still get the financing you need.

Thus, if you are planning on obtaining a stock loan and you have different sets of stocks, it could be better to your benefit to give the more liquid stock as collateral for the financing. When you do that, you will be able to obtain more funds for your loan needs.

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