Securities lending is a form of lending that is widely used by businesses and commercial customers but has become increasingly popular with private clients recently. Many investors use this security loan to increase the return on their portfolio or their investment.
The loan for securities is basically a relatively short-term to medium-term loan, usually granted as a so-called credit line, and does not have to be re-applied for and approved each time. For this amount, either individual securities are deposited as collateral and blocked for sale or, in the case of a long-term business relationship, a credit line is deposited in general and without specific blocking.
Now you can immediately trade in stocks, fixed income securities and much more, even if you do not currently have the liquid funds available on the clearing account or checking account. Especially with very short-term price fluctuations, it can be worthwhile to take advantage of this loan. In boom phases on the stock market often several per cent performance per week are possible, whereas the security loan is much cheaper. Whenever the return on the securities business is higher than the cost of borrowing, you have added value. This increases the return on your securities portfolio through the use of outside capital. A first step towards achieving leverage.
With regard to the calculated interest, the securities loan comparison is always worthwhile. Even if the total package of transaction costs and speed is particularly important for stock trading and securities accounts, too high interest rates can spoil the fun of the transaction. As a rule of thumb for the Securities Lending Settlement, the calculated interest rate should be significantly lower than the current account disbursement rate and should more closely approximate the interest rate of a private consumer loan.
However, one should pay attention to the fact that interest rate changes (downwards) are passed on quickly in the securities loan comparison. It may well be worthwhile to agree a variable interest rate with respect to a comparative interest rate, eg. B. the interbank interest rate Taero plus any surcharge.