Can You Use Stocks as Collateral for a Loan?

Yes. You can use eligible stocks as collateral for a loan through a securities-backed line of credit or a margin account. This lets you borrow without selling your shares upfront. However, you owe interest, and falling stock prices can trigger demands for more collateral or a forced sale

The right starting point is what you need the money for. Borrowing cash for an expense and using stocks to support additional trading can involve different products, restrictions, and risks.

Key Facts

• Your shares secure the debt, so they can be sold if collateral requirements are not met.
• A securities-backed line of credit generally cannot be used to buy or trade securities.
• Margin borrowing can support investment purchases and, at some brokers, cash withdrawals for other purposes.
• Eligibility and borrowing capacity depend on the provider, account, and assets.

The comparison below uses US lending products as examples. Availability and rules differ across jurisdictions

How Does Borrowing Against Stocks Work?

You pledge eligible investments to secure a borrowing facility. The provider determines how much credit those holdings support, and you borrow within that limit. You then pay interest and maintain enough collateral until the debt is repaid.

For a simple illustration, assume a provider assigns a 50% advance rate to $40,000 of eligible stocks. That would support $20,000 of borrowing before any other restrictions. The advance rate is the percentage of the investment's value that the provider accepts for lending purposes.

The 50% figure is hypothetical. Providers set their own eligibility and advance rates, and a portfolio's market value can differ substantially from its loan value. 

What Types of Loans Let You Borrow Against Stocks?

Two common routes are a securities-backed line of credit and a brokerage margin loan.

A securities-backed line of credit, often shortened to SBLOC, is typically a revolving facility. You can repay and borrow again within its limits. Margin loans may offer more flexibility over how you use the money, but the broker's terms still apply.

Before choosing, ask a specific question: Can this facility fund the expense or investment I have in mind?

Which Stocks and Accounts Can Qualify?

Owning shares does not automatically make them acceptable collateral. Check both the asset and the account holding it.

Traditional lenders commonly exclude categories such as restricted stock, options, retirement assets, and leveraged ETFs from eligible collateral, and each provider maintains its own eligibility list. On Backpack, eligible stocks and ETFs can be used as collateral within portfolio margin, and the list of supported collateral assets is published and updated as new assets are added.

Before applying, check:

• Whether your specific stocks or ETFs qualify.
• Whether the account meets the provider's minimum requirements.
• Whether the holdings must be transferred into a pledged or margin-enabled account.
• Whether borrowing is available in your country and account type.

How Much Can You Borrow Against Stocks?

There is no universal percentage. A useful starting measure is the loan-to-value ratio, or LTV:

LTV = Outstanding loan ÷ Current collateral market value × 100

Suppose you borrow $10,000 against $20,000 of stocks. Your LTV is 50%. If those stocks fall to $15,000 while the loan stays unchanged, your LTV rises to about 66.7%.

Assume, purely for illustration, that the agreement requires LTV to stay at or below 60%. At $15,000 of collateral, the maximum supported loan would be $9,000. Repaying $1,000 from outside funds would restore 60% LTV.

This example excludes interest and fees and assumes the stocks remain eligible. It is not a Backpack borrowing limit or liquidation calculation. Margin platforms may assess account equity, other positions, and maintenance requirements instead of using a single LTV threshold.

What Does It Cost to Borrow Against Stocks?

The main cost is interest on the amount you borrow. The rate may be fixed or variable and can depend on the provider, loan size, and value of your collateral. You may also pay account, transfer, late payment, or other fees.

Interest continues to accrue even if your stocks fall in value. For example, borrowing $10,000 at an annual interest rate of 8% would cost approximately $800 over one year, assuming the rate and balance remain unchanged and excluding fees.

Before borrowing, check:

• The current interest rate and whether it can change
• How often interest is calculated and charged
• Whether principal payments are required
• Any additional fees
• Whether unpaid interest is added to the loan balance

A flexible repayment schedule does not make the loan free. You still need enough cash to cover the interest and repay the principal without depending on future stock gains.

What Happens If Your Stocks Fall in Value?

Your loan balance does not decrease when the value of your stocks falls. As a result, your collateral may no longer be sufficient to support the amount you borrowed.

If your account falls below the required collateral or maintenance level, the provider may ask you to deposit more cash or securities, repay part of the loan, or reduce your positions. If you cannot meet the requirement in time, some or all of your holdings may be sold without your approval.

A forced sale can lock in losses and may create tax consequences. You could also lose more than your initial investment when borrowing is used to increase your market exposure. Before borrowing, consider whether you could cover a sudden collateral shortfall during a sharp market decline.

Can You Use Stocks as Collateral on Backpack?

Yes. Eligible US stock and ETF holdings on Backpack can support USD borrowing, perpetual futures trading, and spot margin trading through its unified portfolio-margin system. These stock holdings represent security entitlements to underlying shares. Product availability varies by region and supported market.

Risk is shared across positions within a cross-margined subaccount. Losses elsewhere in that subaccount can weaken its margin health, even if your stocks have not fallen. Backpack's margin documentation states that liquidation begins when its Maintenance Margin Rate reaches 100%. 

Before borrowing, check the current supported assets, collateral weights, borrowing rate, and account margin requirements.