Loan Stock


DEFINITION of 'Loan Stock'

Common or preferred stock shares that are used as collateral to secure a loan from another party. The loan will earn a fixed interest rate, much like a standard loan, and can be secured or unsecured. A secured loan stock may also be called a convertible loan stock if the loan stock can be directly converted to common shares under specified conditions and with a pre-determined conversion rate, as with an irredeemable convertible unsecured loan stock(ICULS).

This type of financing is also known as "portfolio loan stock financing".


There are actually full-fledged businesses that do nothing but loan-stock transactions, allowing a portfolio holder to obtain financing based on the value of their securities, as well as other factors such as the implied volatility of their holdings. A loan-to-value (of the portfolio) ratio will be established - much like with a home mortgage - and the funds will be backed by the security holdings in the borrower's portfolio.

  1. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  2. Convertible Bond

    A bond that can be converted into a predetermined amount of the ...
  3. Fixed Interest Rate

    An interest rate on a liability, such as a loan or mortgage, ...
  4. Loan

    The act of giving money, property or other material goods to ...
  5. Irredeemable Convertible Unsecured ...

    A type of security that can be used to purchase underlying common ...
  6. Unsecured Loan

    A loan that is issued and supported only by the borrower's creditworthiness, ...
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