Fact fiction liquidating loan self

07-Jun-2019 04:50

With a non-recourse loan, the lender has limited options if a borrower fails to repay the amount owed.Generally, the lender’s only remedy is to accept the securities pledged as collateral, even if their value has dropped.If the stock has gone up more than 15 percent over the three years, and is worth more than 5,000, then the customer is “in the money”—meaning the stock is worth more than the customer owes to the lender.The customer can then either repay the loan and get back the stock or request that the lender pay the customer the amount by which the value of the stock exceeds the amount due on the loan.These programs may be marketed by financial planners, investment advisers, insurance agents, accountants, attorneys and others—as well as by representatives of traditional broker-dealers.

Regardless of the hook, these programs supposedly allow you to borrow money against a substantial percentage of your portfolio without giving up the benefits of owning the stock—particularly the potential increase in the stock’s value—and while limiting your risk of loss to only a small fraction (often as little as 10 percent) of the value of the stock.That makes it difficult to ascertain their financial stability or to verify what they are doing with your stock once you transfer it to them.