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Because you can sell. You pledge assets and have a floor value, charles Schaub wouldn't care if you floor was 500k if it was in cash, their risk would be eliminated vs 500k of AMZN. I deal with this all the time selling isn't typically an issue, removing assets from the account would be
OK, when I said sell, I was referring to selling and removing the funds from your account without settling the debt.
Some banks will let you use your brokerage account and securities as collateral for loans as well, so you basically can't sell the securities without paying off the loan (or your account value has to stay a certain % above the loan value). But, you still earn your dividends and wouldn't trigger cap. gains unless you had to sell them to pay off the loan.
Don't have any of those so don't have to think about it.
My bank offers a loan using a persons savings account as collateral. A lot of people have the money to do what they want to do but don't want a 'hit' on their savings so the bank will loan you the money. I'm not sure how much of that money you can still use, if something comes up, and it IS my EF. I figured if I was going to do that I could just "borrow" it from myself and pay it back without the interest the bank will charge. Anyone else hear of something like this? Just curious.
What MathJak says, these types of loans are usually used to help build positive credit history as well as to pay for a large purchase over time using your own money on installment.
Today most credit unions call them Share Secured Loans, I like them over the Secured Credit Cards because the interest rate is a lot lower allowing the payments to be done over a longer extended period of time (which allows you to build positive credit history).
My bank offers a loan using a persons savings account as collateral. A lot of people have the money to do what they want to do but don't want a 'hit' on their savings so the bank will loan you the money. I'm not sure how much of that money you can still use, if something comes up, and it IS my EF. I figured if I was going to do that I could just "borrow" it from myself and pay it back without the interest the bank will charge. Anyone else hear of something like this? Just curious.
I have heard of this. I even took such a loan once, in a silly attempt to establish credit. Young and foolish.
I have heard of this. I even took such a loan once, in a silly attempt to establish credit. Young and foolish.
Why foolish? A Shared Secured Loan is one of the best ways to establish a positive credit history. It's better than a Secured Credit Card I can tell you that much.
no you can not use any of it , think of it as a secured credit card
I worked at a major bank for several years as the manager of a local branch and we used to do these loans all the time. At that particular bank, you could have access to any money that was in excess of the balance of the loan.
If youre looking at smaller dollar amounts your bank should give you a signature loan. Mine gave me a 12k loan to pay off credit card debt, no collateral needed. Shop around.
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