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What Is Stock Lending?

Stock lending can give you passive income on the stocks you already own.

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Lena Borrelli

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Matt Miczulski

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For investors holding stocks with no immediate plans to sell, stock lending can be a lucrative way to generate extra income while maintaining your portfolio. While stock lending provides additional income for investors, borrowers can use the shares for short selling, covering trade settlements or as collateral for loans in margin accounts. These securities can then be re-lended to other investors or used for short sales or a failure-to-deliver situation. A failure-to-deliver is when a seller does not deliver shares to the buyer on the settlement date.(1)

Many brokerages offer stock lending programs as an optional service, typically requiring investors to meet certain eligibility requirements. Read on to learn about how stock lending works, its benefits and risks and which brokers offer this service.

What is stock lending?

Stock lending, also known as securities lending, is when an investor lends shares to another party for a fee plus interest.(2) (3) During this period, the lender temporarily loses shareholder voting rights and doesn’t receive dividends from lent-out dividend-paying stocks. Instead, they typically receive a cash substitute payment with different tax implications.

While stock lending provides additional income for investors, borrowers use the borrowed shares for short selling, covering trade settlements or as collateral for loans in margin accounts.

For investors holding stocks with no immediate plans to sell, stock lending can be a profitable way to generate extra income while maintaining their portfolios.

How does stock lending work?

To get started, you must have an account with a broker that offers stock lending. Then, there are a few steps to follow to complete the process:(4)

  • Matching. The broker identifies available shares and matches borrowers with lenders based on demand for specific stocks. This process is usually automated.
  • Agreement. The broker typically sets the terms of the agreement, including fees and required collateral.
  • Collateral. Based on the terms of the agreement, the borrower delivers the collateral, which is typically held in a custodial account with the broker. The collateral is usually cash or securities.
  • Transfer. Once the agreement is made and the collateral is delivered, the shares will be transferred from the lender to the borrower. The borrower is then free to use the shares for a short sale or other activities.
  • Payment. If your shares are lent, brokers typically pay a percentage of the total net proceeds they earn and receive for lending shares.
  • Return. When the loan term is over, the borrower returns the shares to the lender and the loan is complete.

Stock lending pros and cons

There are stock lending pros and cons for both borrowers and lenders.

Pros

  • Additional income. Lenders can earn passive income when they lend their shares out to borrowers.
  • Low effort with broker programs. Many retail brokers offer stock lending programs that handle the logistics.
  • Flexibility to opt out. Retain the right to recall your shares at any time or opt out of the broker’s stock lending program entirely.

Cons

  • Loss of voting rights and SIPC insurance. When loaning out stocks, lenders lose voting rights and Securities Investor Protection Corporation (SIPC) insurance coverage.
  • Dividend tax hit. You receive a payment in lieu, which is taxed as ordinary income (higher) rather than a qualified dividend (lower).
  • Counterparty risk exposure. If the broker or borrower defaults, you could face delays or losses recovering your shares.

Brokers with stock lending programs

SoFi Active Invest

9 Excellent

Get up to $1,000 in stock when you open and fund a new account. T&Cs apply.
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In March 2023, SoFi® launched its share lending program for all investors with shares in their account — regardless of the value or quantity of shares they hold. Members receive a minimum of 15% of the total net proceeds SoFi earns and receives, with payments made monthly. It operates under the Fully Paid Securities Lending Program and uses Apex Clearing as its clearing broker. Enrollment is automatic for SoFi Invest members, but members can unenroll at any time with a message to SoFi's chat or app messaging service.
$150
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Get $150 from Finder Become a Finder member, then open a new SoFi Active Invest account through Finder as a first-time customer, and make an Eligible First Deposit of $1,250 or more within 5 days of clicking the Finder link. Keep your account open. Offer ends November 30, 2026.
Separate T&Cs and limits apply.
Annual fee $0 per month
Minimum deposit $0
Signup bonus Get up to $1,000 in stock

Robinhood

9.4 Excellent

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To participate in the Robinhood stock lending program, you must either have a minimum of $5,000 in total account value, at least $25,000 in reported income or some trading experience already. You will need to enable Stock Lending to get started, and then your shares will be eligible for loan. Fractional shares are not eligible, but you can lend whole shares of securities like stocks and exchange-traded funds (ETFs). If your stock is borrowed, you receive monthly payments of up to 15% of the gross revenue that Robinhood generates from lending shares. You can also disable Stock Lending to unenroll from the program at any time.
Annual fee $0 per year
Minimum deposit $0
Signup bonus N/A

Public.com

9 Excellent

Earn a 1% match on IRA contributions and rollovers. T&Cs apply.
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Like SoFi, Public participates in a Fully Paid Securities Lending Program with Apex Clearing Corporation as its clearing firm. You must enroll in the program to enable stock lending, but once you are, Apex may loan out the whole shares of stocks or ETFs in your brokerage account. In return, you receive a minimum of 10% of total net proceeds each month. To be eligible, you must have at least $5,000 in your brokerage account and have more than $50,000 in annual income, assets and net worth. You may not participate if you have a stated investing goal to preserve capital and no stated investing experience.
Annual fee $0 per month
Minimum deposit $0

Interactive Brokers

9.4 Excellent

Read review
The Interactive Brokers stock lending program is its Stock Yield Enhancement Program for borrowing and loaning stock. Fully-paid shares earn 50% of a market-based rate, which you can view anytime, along with the interest rate you are being paid. Stock lending is available to Interactive Brokers clients who are approved for a margin account or hold a cash account with at least $50,000 in equity. Collateral must be paid in US Treasuries or cash.
Annual fee $0 per year
Minimum deposit $0
Signup bonus N/A

E*TRADE from Morgan Stanley

8.6 Great

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The E*TRADE Fully Paid Lending Program is available to brokerage cash accounts and IRAs with at least $200,000 in assets under management or liquid net worth. After you enroll, your fully-paid securities are eligible for stock trading. Cash is used for collateral, and loan income is paid as a monthly credit with a market-driven interest rate that is based on several factors, including borrowing demand, market supply and short selling. To see the interest rate, as well as loaned shares and balance details, simply log in to your account, where you can also access a listing of your loaned shares and balance details.
Annual fee $0 per year
Minimum deposit $0
Signup bonus Get up to $1,000
terms apply

Charles Schwab

9.4 Excellent

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Schwab's Securities Lending Fully Paid Program offers stock lending for your fully paid securities with cash as collateral and no trading restrictions. Enrollment is invitation-only and requires a call to the Securities Lending Services team to enroll or unenroll. Only accounts with a minimum $100,000 household net worth are eligible. Enrollment is then completed with a phone call to the Securities Lending Team. The interest rate is based on market demand, changing daily, and earnings are paid out monthly. You can log in to your account online to see your loaned shares, interest rate and total earnings.
Annual fee $0 per month
Minimum deposit $0
Signup bonus Get a $101 bonus

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Finder is not an advisor or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.

Is stock lending a good idea?

Stock lending can be profitable when you plan to hold your stocks for a long time. Many brokers offer stock lending programs, so you may be able to use the brokerage account you already have to receive earnings on the positions you hold.

However, you lose voting rights and SIPC insurance, and you have different tax implications if your dividend-paying stocks are lent out. Additionally, not all brokers guarantee minimum earnings, so your rate is often based on market demand.

Ultimately, whether stock lending is a good idea depends on your risk tolerance and overall investment strategy.

Bottom line

Stock lending allows investors to make money on the securities they already own, serving as a way to create passive income using your existing portfolio. However, it is important to know of the risks involved, as earnings are never guaranteed. Be sure to weigh the pros and cons before proceeding.

If you think it is right for you, compare the best brokers offering stock lending programs to get started.

Frequently asked questions

Is stock lending safe?

Just like an investment, stock lending has its risks, like loss of voting rights and SIPC insurance coverage, in addition to a different tax liability for dividend-paying stocks.(12) One should always exercise caution and consult a financial advisor for personalized advice regarding the best strategies for their portfolio.

Why would someone lend a stock?

Stock lending is a way for investors to earn passive income on the holdings in their portfolios.

Can you lose your stock on stock lending?

Once you loan your stock, you lose SIPC insurance coverage.(13) This leaves you vulnerable to potential losses if the broker goes under.

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To make sure you get accurate and helpful information, this guide has been edited by Matt Miczulski as part of our fact-checking process.
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Lena Borrelli is an experienced finance writer with a deep understanding of personal finance, investing and consumer banking. Her work has been featured in top-tier publications such as Forbes, TIME, Bankrate, Moneywise and Annuity.org, where she provides expert insights on financial trends, smart money management and emerging fintech solutions. With a background in personal finance and content strategy, Lena specializes in breaking down complex financial topics into clear, actionable advice for readers. When she is not writing or scanning the news for the latest headlines, she is happiest spending time in the Florida sunshine with her husband and two pups. See full bio

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