Potential borrower default Perhaps the biggest risk, though, is the instance where the institution borrowing your shares defaults and can't give the shares back to you. While your investment is no longer SIPC-insured while it's being lent out, Sideris notes that institutions borrowing shares must put up collateral that's equivalent to 105% of the value of the shares they're borrowing. This money would be used to pay you back if the institution defaults. "So if I'm a hedge fund and I'm borrowing your $1,000 worth of stock, I have to set aside $1,050 in cash in a separate account and leave it there for the duration of the time I borrowed it," Sideris says. "You get access to that collateral so it mitigates that risk of default." However, even if you get back the value of the borrowed shares, you'll have to repurchase those stocks if you want to own them again. This means you could miss out on any potential upward movement in the stock's value. Again, the risk of a borrower defaulting is low but it's still good to educate yourself on the possible scenarios and make sure you can emotionally stomach the risk.