The current credit markets make it very difficult for the average person to receive a low-cost personal loan. In many cases, banks are not willing to give personal consumer loans to someone that has less than a perfect credit score. While getting an unsecured loan from a bank may be difficult to obtain, a better option would be to get a loan through a specialty finance company by using a stock portfolio as collateral.
One of the largest providers of stock-secured loans in the world is Equities First. Equities first specializes in preparing and providing personal loans that are secured by a stock portfolio. When providing a loan, Equities First will be able to review your stock portfolio and take an assignment of the portfolio. In the event that the loan is not paid back, the company will have the ability to liquidate the portfolio. Having this liquid asset as collateral will provide a significant amount of security to the company, which will allow them to offer reduced rates.
Overall, the company targets providing loans to people that are high net worth individuals that are in need of liquid capital, but do not want to sell their stock portfolio. While most of the company’s clients are high net worth individuals, they also provide similar loans to the average consumer and small businesses as well.
There are several situations where a person would be better off taking out a loan from the company as opposed to selling their stock. The one situation is when it comes to tax and estate planning. If you have a portfolio of stock and are looking to sell, the capital gains tax that you will have to pay could be high depending on when the stock was bought.
In these cases, it would be better off holding the stock for a longer period of time and waiting to sell until your tax liability would decline. Other consumers choose to hold on to the stock for a longer period of time due to their investment strategy. If they believe that the stock will continue to appreciate in value, most would prefer to take out a loan as opposed to selling.