There are two kinds of stock loans; margin loans and stock-based loans. Margin loans are provided by a stock broker. Stock brokers can typically only offer loans up to 50% of the value of the stock. Stock-based loans are provided by a conventional lender such as a bank or finance company. Conventional stock lending companies can offer loans of 90% or more. Stock lending is simple. Almost any publicly traded stock is used as the foundation for a loan. The borrower lets the lender know how many shares of a certain stock they want to use. The stock lender reviews the stock and determines a loan amount. An offer can be given to the borrower the same day. Once the borrower accepts the loan offer, their stock is delivered to the stock lender. This can be done in one of two ways: by transfer on the books of the Depository Trust Company or by physical delivery in certificate form. The loan is then funded after receiving the certificate and after verification of the provenance and marketability of the shares. Unlike typical loans, stock-loans are determined by the type of stock, not the borrower. Using stock as the foundation for a loan allows a smart investor to take advantage of many of the same lending options as conventional loans, but under less scrutiny and with more privacy. One's credit score, credit history, household income and property do not play a role in determining the amount of money to be borrowed. There are no credit checks performed. With a stock-loans, the stock is under consideration for the loan, not the borrower. The stock-loan provider reviews the history of the stock and establishes a loan amount based on the stock. Stock-based loans are a type of hedging strategy. This is because the borrower is reducing their risk of investment. Whether the loan proceeds are used for home remodeling, purchasing more stock options, paying off debt, or corporate financing, the borrower will increase their assets.

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