How does a share-secured loan work?
Unlock cash using your own investments without selling your valuable shares or assets.
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Share-Secured Loans Explained
A share-secured loan can feel like having your cake and eating it too. Instead of cashing in your investments when you need money, you can borrow against them - holding onto your shares while still accessing funds. Whether you're clearing debts or funding a project, this type of secured loan could be a smart way to leverage your assets.
How do share-secured loans work?
A share-secured loan (sometimes called a stock-backed loan) lets you use your shares, bonds, or other marketable securities as collateral for a personal loan. It's one of the lesser-known, strategic borrowing options in the UK.
- Your investments stay in place, typically in a managed account
- You borrow a percentage of the value - often 50% to 85%
- Loan rates are usually much lower than unsecured loans
- There's no need to sell shares and trigger capital gains tax
- You can keep earning dividends or interest on the assets
- It's often quicker to arrange than a mortgage or homeowner loan
- The value of your shares matters - great if your credit isn't spotless
Why tap into your portfolio?
Share-secured loans aren't for everyone - but in the right situation, they offer major advantages.
- You want to avoid liquidating investments prematurely
- You're looking for a lower-interest alternative to credit cards
- You've built up a healthy investment portfolio
- You need fast funding with flexible repayment terms
- You prefer not to go through a lengthy mortgage application
But if your investments drop significantly in value, remember:
- Your lender could ask for more collateral - or even sell your shares to cover the loan
Summing up
A share-secured loan tends to offer lower interest rates and more flexibility than unsecured options, so it's a strong option if you have assets but limited liquidity. But it's not risk-free. If your shares fall in value, you may face extra demands or asset liquidation. Be sure to weigh the benefits against the downsides and get professional advice if you're unsure.
Frequently Asked Questions: Secured Loans
What kind of shares can I use for a secured loan?
You can usually use publicly traded shares, ETFs, mutual funds, and in some cases, bonds. The assets must be easy to value and sell. Illiquid or highly volatile assets - like crypto or private equity - are generally not accepted. The more stable your investments, the better your loan terms are likely to be.
What happens if my shares lose value?
If the value of your investments drops below a certain threshold, the lender might ask you to top up your collateral. This means you'll need to either provide more shares or assets or repay part of the loan. If you don't act quickly, the lender has the right to sell some or all of your shares to cover the loan amount.
Is a share-secured loan good for bad credit?
It can be a useful option if your credit score isn't ideal. Since the loan is backed by your assets, lenders are taking on less risk and may offer better rates or approve applications they'd otherwise reject. But you still need to meet some basic eligibility checks and prove asset ownership.
Can I repay early without penalties?
Many share-secured loans offer flexible terms, and early repayment is often allowed with no fees. But not all lenders have the same rules. Always check the small print and ask directly about any early repayment charges before you agree to the loan.
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The details shown are for illustration only and may not include all lenders or products. Actual rates and terms depend on your circumstances and the lender’s assessment. Information was correct at publication but may change at any time.
