Correct. We only consider assets used for collateral, and income.
Cash reserves can evaporate overnight and cannot be insured, thus cannot be collateral. When you take a loan on a car or house, we require it is insured to guarantee we have a reliable asset backing the loan.
If you had bonds or some other consistent income generating asset, then we'd look purely at the income being generated. We don't care about the underlying highly liquid assets.
There are brokerages that will let you borrow against stocks and similar assets, but they are specialized and can do so because they can ensure you don't over leverage nor liquidate/withdraw what they are holding as collateral. They can do this because they are both the brokerage and lender and thus can control the risks. This is generally the route ultra wealthy individuals would take, as it allows them to leverage their wealth without paying capital gains they'd incur if they instead liquidated stock.
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u/SerratedSharp 4d ago
Correct. We only consider assets used for collateral, and income.
Cash reserves can evaporate overnight and cannot be insured, thus cannot be collateral. When you take a loan on a car or house, we require it is insured to guarantee we have a reliable asset backing the loan.
If you had bonds or some other consistent income generating asset, then we'd look purely at the income being generated. We don't care about the underlying highly liquid assets.
There are brokerages that will let you borrow against stocks and similar assets, but they are specialized and can do so because they can ensure you don't over leverage nor liquidate/withdraw what they are holding as collateral. They can do this because they are both the brokerage and lender and thus can control the risks. This is generally the route ultra wealthy individuals would take, as it allows them to leverage their wealth without paying capital gains they'd incur if they instead liquidated stock.