Have you also been tempted to invest in shares? Logical with the continuing low interest. But maybe you need money unexpectedly now, and isn’t it time to sell those shares? Then you can consider entering into a securities loan. An explanation.
What is a securities credit?
If you are in possession of securities, you can borrow money on that basis. Please note that only shares and bonds are eligible for this. With a securities credit, the value of your securities therefore serves as collateral. The value of your securities portfolio must therefore be reasonably stable.
Volume and interest
That’s why most lenders borrow 50 to 80 percent of the total value of your portfolio. The interest that you have to pay differs per provider, but is usually lower than with a personal loan or a revolving credit. The lender often looks at the value and security of the securities portfolio and sets an interest rate based on this. The term of the loan depends on your personal preference and the conditions of the bank or other financial service provider.
As so often, every solution has advantages and disadvantages. A disadvantage of a securities credit is that the credit limit can fall. After all, this limit is linked to the value of the securities. If your securities portfolio decreases in value, the maximum withdrawable credit immediately decreases. If you have taken out the maximum credit before the decrease in value, you must immediately repay the difference between the two maximum withdrawable credits. If you are unable to do this, part of your portfolio will be sold. On the other hand, as stated, the interest rate is usually lower than with other loans.
- The interest rate is lower than with a personal loan or revolving credit.
- Interest is only payable on the amount withdrawn.
- The loan can always be repaid, without penalty interest or other extra costs.
- Securities credit is an easy way to get money quickly if you have a securities portfolio of shares and bonds with sufficient cover value.
It is important to know that the entire securities portfolio is pledged, including the securities that do not contribute to the collateral value.
Do you prefer a ‘normal’ loan?
If you are someone who still likes certainty and good agreements, it may be better to take out a so-called classic credit. Depending on the situation you are in, a personal loan or revolving credit often offers a solution. These forms of credit differ in terms of duration, interest and repayment schedule.
So choose the loan form that matches what you need the money for. If you need a one-off amount for the purchase of a product, then the personal loan is most suitable for that. If you want to borrow money for something that you do not know exactly how much this will ultimately cost, then the revolving credit is a better solution. You can always withdraw extra money if you are faced with unforeseen expenses.
Whichever loan you want to take out, borrowing money always costs money. Save on this by making a good comparison exercise in advance.