A Loan Against Securities (LAS) is a secured borrowing facility that enables investors to raise funds by pledging their financial assets, such as shares, mutual funds, bonds, debentures, or other approved securities, as collateral. This financing option allows individuals to meet their liquidity requirements without selling their investments, helping them remain invested in the market while accessing the funds they need.
Under this arrangement, the lender evaluates the value and type of securities pledged and sanctions a loan based on a predetermined loan-to-value (LTV) ratio. Since the loan is backed by marketable assets, lenders generally offer competitive interest rates compared to unsecured credit options. Interest rates commonly range from 7.5% to 14% per annum, although the actual rate may vary depending on the lender, the nature of the securities, and prevailing market conditions.
One of the key advantages of LAS is that investors can continue to benefit from potential capital appreciation, dividends, interest income, or other returns generated by their pledged investments. The facility also offers flexibility, with many lenders providing overdraft-style arrangements that allow borrowers to withdraw funds as needed and pay interest only on the amount utilised.
A Loan Against Securities is often used for personal, business, educational, or emergency financial requirements, making it a cost-effective and convenient source of short-term funding.
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What is a loan against securities?
A Loan Against Securities allows you to borrow funds by using your investments such as stocks, bonds, mutual funds, and fixed deposit as collateral. This means you don't need to sell your assets to access liquidity. Instead, you can leverage their value to get the funds you need while retaining ownership of your investments. It’s an ideal solution for urgent financial needs, offering competitive interest rates and flexible repayment options.
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How does a loan against securities work?
Here’s a quick look at how a loan against shares works:
Eligibility check:
Lenders evaluate the shares you want to pledge. The loan amount depends on the market value of your securities, with most lenders offering up to 50-90% of that value.
Loan sanction and collateral assignment:
Once approved, your securities are pledged as collateral, but you retain ownership. The lender holds them as security until the loan is repaid.
Disbursal of funds:
Funds are typically disbursed within 48 hours* after the loan is approved, ensuring that your liquidity needs are met fast.
Flexible repayment terms:
You can choose between standard EMIs or opt for a flexi loan, where you only pay interest on the amount used, offering more flexibility.
Why choose a loan against securities?
Quick access to funds:
Unlike unsecured loans, which can take days to process, a loan against shares can be approved and disbursed quickly, often within 48 hours*. This is ideal when time is of the essence.
Keep your investments intact:
A significant advantage of this loan is that you don’t have to sell your shares. You can continue to hold onto them while still benefiting from any capital gains.
Lower interest rates:
Being a secured loan, the interest rates are generally lower than personal loans, making it an affordable option for urgent liquidity.
Flexible repayment plans:
Whether you choose a lump sum or monthly repayments, the flexibility of repayment options makes it easier to manage your finances without additional stress.
Loan amount based on security value:
The amount you can borrow is based on the value of the securities you pledge. Generally, you can access 50% of the market value of your shares, which means you can borrow substantial amounts based on the value of your holdings.
