I want to borrow a couple hundred thousand bucks to put into two or three hundred dividend paying stocks, funds, reits, royalty trusts, muni bonds etc. I want to have the stock be collateral for the loan (like when you get a mortgage the house is the collateral). Plus you'd think banks might be more willing to accept stocks as collateral since they are more easily liquidated than houses. Of course on the flip side you can't remodel your stock to make it worth more. Obviously for this to work the APR on the loan would need to be lower than the average APY on the stocks/funds etc. Initially my thought was borrow 200K at around 5% to 6% and diversify it into instruments paying 7% to 12%. DD would be performed before buying any of the stocks etc. I could probably put 20 to 25K into a CD at a bank to act as additional collateral. What do you guys think? Are they going to laugh me out of the bank?
What you are talking about is basically a margin load which many banks already offer. They do great in upmarkets but if the market turns against the gearing you have taken on can come and bite you in the arse. Just ask the Tricom and Opes clients in Australia who are down hundreds of millions on these types of instruments.
I work in a bank, but I'm no expert in credit. My gut feeling is that a bank would not go for this. The liquidity of your investments might actually work against you. The bank knows you can liquidate it at a moment's notice and skip town. Also, they know you might trade on margin and dig yourself into a really deep hole. Good luck in any case.
Considering that Reg T only permits borrowing 50% of the market value, I'd say they're going to have a good laugh. OldTrader
In Australia you can/could borrow 80% of the shares value within the top 100 I think Here is what can happen though http://business.smh.com.au/lift-goes-under/20080410-25cp.htmll
Right now banks are reducing their lending to shore up their balance sheet. Consumer loan decisions are made by scoring software at large banks, so if it doesn't fit the criteria it would be rejected. A smaller bank may look at it at a personal level i.e. by a human loan officer - the real question is how much equity do you have in your home? Banks make you write a business plan and then just turn to the 'equity in home' section of the aplication form, discount it to 40% and that is your loan amount.
Having been a banker for 2 years I will tell you, you have not a chance in hell (this only applies to big banks).
you could do something similar with the credit cards that offer loans with no apr, they require monthly payments on time or the interest goes way up.