To Pledge Your Assets In Singapore

Doing the Singapore pledge for your loans by using an investment loan? We see how pledged loans work and how they can help you in Singapore.

A pledged loan is usable for the person taking a loan to pledge collateral. He can use machinery, property or some investments for financing of the loan to get cash flow for personal or business use. It is all based on the Total Debt Servicing Ratio (TDSR) framework provided by the Monetary Authority of Singapore (MAS).

Stocks and collective investment schemes can be such assets that can be used for pledging. It can be used during a situation when your income is not enough to meet the TDSR threshold of 60%. So it may be worthwhile for you to draw down an investment loan to invest in some financial products like equities, derivatives, bonds and other products. These invested financial products are assets which can be used in the pledging process.

Obtaining an investment loan to get funds to achieve higher returns on the portfolio. This can help you achieve greater cashflow to your bank accounts should the profits from the investments can be realised. But investments do come with risks. If the returns do not exceed the interest rates of the investment loan, you will suffer losses. You will still have to make repayments on the investment loan even if you lose money on the investments. This means you will pay double - the interest rate costs and the losses.

Some derivative products like options and futures also come with a more than 100% loss, which means you pay more than your initial investment amount, only when the investment suffers a loss. In this sense, you will incur higher losses and costs than the investment loan amount you have drawn down.

To have more understanding on the topic of Singapore pledge using investment loan, check out asset financing - https://www.investopedia.com/terms/a/assetfinancing.asp

Asset financing is a process that can lead to some pledging to do in Singapore system. This only applies if you are a business owner with a registered company. Your company may already have assets like equities out of the investments done. If your equity holdings in your portfolio is sufficient, you can use them to obtain a cash loan, which may be an investment loan. But in return, the lender, which is a financial institution that is either a bank or a licensed moneylender, must have some security interest in the equity.