Many investors often face a dilemma when they need immediate funds—should they sell their investments or explore alternative options? Selling investments may disrupt long-term financial goals and lead to potential opportunity losses. However, there is a smarter way to meet short-term liquidity needs without liquidating your portfolio. A Loan Against Securities (LAS) allows you to leverage your financial assets, such as approved shares, mutual funds, as collateral to access funds while continuing to remain invested.
How Does Loan Against Securities Work
Loan Against Securities is a secured facility where you pledge shares, mutual funds, bonds, or insurance to access funds, without selling assets, through a quick, digital process.
Leverage your investments to avail funds!
Overview
How does loan against securities work
A Loan Against Securities enables you to borrow funds by pledging your financial assets as collateral. The lender evaluates the value of the securities and sanctions a loan amount based on a percentage of their market value, known as the Loan-to-Value (LTV) ratio. You retain ownership of your securities, and they continue to generate returns, such as dividends or interest, even during the loan tenure.
The facility works like an overdraft, where you can withdraw funds as needed and pay interest only on the amount utilised.
This type of loan is ideal for individuals seeking quick liquidity without disrupting their investment strategy. It offers flexibility in repayment, and competitive interest rates, making it a preferred choice for high-net-worth individuals (HNIs), entrepreneurs, salaried professionals, and investors.
What assets can be pledged for loan against securities
You can pledge a variety of financial assets to secure a Loan Against Securities. The type of assets accepted as collateral may vary between lenders, but the following are commonly eligible:
| Asset Type | Examples |
|---|---|
| Listed Shares | Equity shares of listed companies |
| Mutual Funds | Debt and equity mutual funds |
Your investment portfolio can serve more than one purpose. Beyond building long-term wealth, it may also help you access funds when financial needs arise.
Quick tip: Why sell your investments when you can get a loan against them? Apply now!
Loan against securities eligibility
Eligibility for a Loan Against Securities is determined by factors such as your ownership of financial assets, creditworthiness, and the type of securities being pledged. Below is a general overview:
| Eligibility Criteria | Details |
|---|---|
| Ownership of Securities | Must own eligible securities |
| Age | 21 – 90 years, co-borrower will be added if the applicant is more than 70 years of age. |
| Type of Securities | Listed shares, mutual funds |
Loan against securities process — step by step
The process of availing a Loan Against Securities is simple and streamlined:
- Application: Submit your loan application online or offline.
- Asset evaluation: The lender evaluates the value and eligibility of the pledged securities.
- Loan approval: Based on the LTV ratio, the loan is sanctioned.
- Agreement signing: Sign the loan agreement and provide necessary documentation.
- Lien marking/pledging of securities: Complete lien marking or pledging of securities.
- Disbursement: The approved loan amount is disbursed to your account.
Explore how your listed shares can help unlock liquidity while you remain invested.
Interest rate and repayment in loan against securities
Loan Against Securities typically offers lower interest rates compared to unsecured loans. Repayment is flexible, as the facility operates like an overdraft. You are required to pay interest only on the utilised amount.
What happens during the loan tenure
During the loan tenure, you retain ownership of your pledged securities. They continue to generate returns, such as dividends or interest. However, if the value of your securities drops significantly resulting in margin shortfall, the lender will request additional collateral or partial repayment to maintain the LTV ratio within 7 working days.
Conclusion
A Loan Against Securities is an excellent financial tool for individuals seeking liquidity without selling their investments. By leveraging your financial assets, you can access funds quickly and efficiently while staying aligned with your long-term financial goals.
Your investment portfolio can be more than just a wealth-building tool. With the right financial strategy, it may also help you meet short-term liquidity needs without disrupting long-term financial goals.
Avail hassle-free loans against securities. Apply now!
Frequently asked questions
How does loan against securities work?
A Loan Against Securities allows you to pledge financial assets as collateral to access funds while retaining ownership of the securities.
What is the step-by-step process to get a loan against securities?
Submit an application, get your securities evaluated, sign the agreement, complete lien marking or pledging of securities, and then receive the loan amount in your account.
How is the loan amount calculated in loan against securities?
The loan amount is calculated based on the LTV ratio, which depends on the type and value of the pledged securities.
Do I retain ownership of my securities during a loan against securities?
Yes, you retain ownership, and your securities continue to generate returns like dividends or interest.
How quickly is a loan against securities disbursed after application?
The loan is typically disbursed post sanction, execution of loan agreement and creation of pledge.
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