Types of securities eligible for instant loans
Instant loans against securities offer a quick and convenient way to access funds by pledging your investments as collateral. Here are some common types of securities that can be used for such loans:
1. Loan Against Shares
- How it works: You pledge your shares as collateral to secure a loan.
- Eligibility: Listed equity shares of Indian companies.
- Benefits: Quick disbursal, lower interest rates compared to unsecured loans, and the ability to retain ownership of the shares.
2. Loan Against Mutual Funds
- How it works: You pledge your mutual fund units as collateral to secure a loan.
- Eligibility: Units of most mutual fund schemes.
- Benefits: Quick disbursal, lower interest rates, and the ability to continue earning returns on your investments.
3. Loan Against Bonds
- How it works: You pledge your government or corporate bonds as collateral to secure a loan.
- Eligibility: Government bonds, corporate bonds, and debentures.
- Benefits: Lower interest rates, tax benefits on interest payments, and the ability to retain ownership of the bonds.
4. Loan Against Insurance Policy
- How it works: You pledge your life insurance policy as collateral to secure a loan.
- Eligibility: Term insurance, endowment plans, and whole life insurance policies.
- Benefits: Quick disbursal, competitive interest rates, and the ability to continue the insurance policy.
5. ESOPs Financing
- How it works: You pledge your vested Employee Stock Ownership Plan (ESOP) shares to raise funds.
- Eligibility: Vested ESOPs from eligible companies.
- Benefits: Instant liquidity, no need to sell shares, and ownership remains intact.
How does it work?
When you apply for a loan against securities, the lender evaluates the value of your pledged securities and determines the loan amount based on a Loan-to-Value (LTV) ratio, typically it is up to 50%. The securities remain in your account but are marked as collateral. Interest is charged on the loan amount, and you can continue to receive dividends and benefits from your securities. The loan can be repaid in flexible terms, and once repaid, the pledge on the securities is lifted.
Features and benefits of loan against securities
- Quick access to funds: Get funds without selling your investments.
- Retain ownership: Continue to benefit from dividends and price appreciation of your securities.
- Flexible repayment: Choose from various repayment options to suit your financial situation.
- Lower interest rates: Typically lower than unsecured loans due to the collateral provided.
Documents required
To apply for a loan against securities, you will need the following documents:
- Identity proof: Aadhaar Card, Passport, Voter ID, or Driving Licence.
- Address proof: Utility bills, Passport, Aadhaar Card, or Voter ID.
- Demat account statement: Showing the details of the securities being pledged.
- Bank statements: Recent bank statements for verification.
Eligibility criteria
Eligibility criteria for an instant loan against securities generally include:
- Age: Applicant should be between 21 and 70 years.
- Securities: Acceptable securities include shares, mutual fund units, bonds, and debentures.
- Income proof: Some lenders might require proof of income to assess repayment capacity.
How to apply for an instant loan against securities online?
Here is a simple step-by-step guide to help you apply online for an instant loan against securities.
Step 1: Check eligibility
Start by reviewing the lender’s eligibility criteria. Typically, you must own eligible securities such as shares, mutual funds, or bonds in your name. Some lenders may require a demat or folio account and a minimum holding value.
Step 2: Submit documents
Upload basic documents online such as your PAN card, ID proof, address proof, and details of the securities to be pledged. E nsure all information is accurate to speed up verification.
Step 3: Get approval and disbursal
Once verified, your loan request is approved instantly. The pledged securities are marked as collateral, and funds are disbursed directly into your bank account often within a few hours.
Interest rates and charges
Interest rates for loans against securities are typically lower than unsecured loans, starting from around 9-11% per annum. Factors influencing the interest rates include the type of securities pledged, the loan amount, and the borrower’s credit profile. Additionally, lenders may charge processing fees, documentation charges, and other miscellaneous fees. It is advisable to compare offers from different lenders to find the best terms and conditions.
Conclusion
An instant loan against securities is a smart way to access quick funds without disturbing your long-term investments. By pledging shares, mutual funds, or other eligible securities, you can meet urgent financial needs while retaining ownership. It is a fast, flexible, and cost-effective solution for short-term liquidity.
