A collateralized loan, also known as a secured loan, is a type of loan that is backed by collateral. Collateral can be an asset (like the investments in your EasyEquities portfolio) or property that the borrower pledges to the lender as security against a loan. If the borrower then fails to repay the loan, the lender has the right to take and sell the collateral to recover the outstanding amount.
Collateral can take a few different forms, depending on the type of loan and the lender's requirements. Common examples of collateral include real estate (such as a house or land), vehicles, investments (stocks or bonds), or valuable personal assets (like jewelry and artwork).
By offering collateral, borrowers can give the lender extra security, which reduces the risk associated with a loan. Because of this, collateralized loans often come with lower interest rates compared to unsecured loans, where no collateral is required.
The amount of money a borrower can receive through a collateralized loan depends on the value of the collateral. Lenders typically assess the value of the collateral and offer a loan amount that is a percentage of the collateral's value. A loan-to-value (LTV) ratio is commonly used to determine this percentage. A LTV shows the ratio between the amount of a loan and the value of the asset being financed. Read about the LTV applied for our EasyCredit lending product here.
EasyEquities lending product, EasyCredit, is a type of collateralized lending called securities-based lending, that allows you to borrow up to R300 000 based on the value of qualifying investments you own in your EasyEquities portfolio, with a once off 1% initiation fee on your loan value. Qualifying investments consist of the top 100 shares and the most liquid ETFs. With no restrictions on what the loan can be used for, EasyCredit can be used to access liquidity, without disrupting your long term investment goals. This form of flexible lending can be used to expand your portfolio, diversify, invest in offshore assets, finance new business opportunities, cover your deposit for a new property or whatever else you may need.
Activate your EasyCredit account in a few easy steps:
Log in to your EasyEquities account
Click on your profile menu (top right) and select Account Management
Select Activate New Accounts
Select EasyCredit
Alternatively, if you are using the EasyEquities app, you will have the option to activate this account by selecting the EasyCredit card on the Portfolio tab of your account.