Securities Lending and My Money - Worldwide Stock Loans
What you choose to do with your money once you’ve received a stock loan is up to you. That being said, there are more and less financially sound ways to do this, and learning to navigate these decisions will determine whether or not you will be able to pay that stock loan back.
One of the better choices borrowers do is to utilize their loans to pay back other debts with higher interest rates. Many investors are college grads who have high-interest student debts that are just expanding with every year. Before these become unmanageable, many investors use their stocks to leverage a low-interest rate loan from a financial institution and then utilize this money to pay down their student debts.
Others utilize stock loans as a method of boosting their portfolio by investing in new stocks. The main thing to remember here is to diversify rather than acquire more of the same. In this manner, if one stock declines dramatically, the other may still be sold to pay back the debts.
Unfortunately, many consumers do not behave sensibly with their stock loans, opting to spend them on a luxury lifestyle, according to one study from the Financial Industry Regulatory Authority. These folks appear to be seeking to live a lifestyle they connect with success at playing the stock market.
When taking out stock loans, it is important to remember that the money is not truly yours. It is something you have only temporarily. The only truly smart thing to do with this money is to use it to make money for yourself before giving it back. Spending it on something that offers no returns or in no way improves your finances is only going to hurt your situation in the long run