How does a Loan Against Shares work

Know how a loan against shares works and its key features, to make an informed decision when applying.
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5 min read
03-October-2025

Ever wondered if there is a way to access quick funds without selling your shares? A loan against shares lets you do just that. Instead of liquidating your portfolio and missing out on future gains, you can pledge your shares as collateral and unlock immediate liquidity. It is a smart way to stay invested while also meeting urgent financial needs like medical expenses, education costs, or business requirements.

Get instant liquidity without selling your portfolio pledge shares and meet needs on your terms. Apply now

What is a loan against shares?

A loan against shares is a secured loan where you pledge the shares you already own to raise funds. The lender values your holdings and sanctions a loan based on a percentage of their market value.

The best part? There is no restriction on how you use the money. Whether it’s paying school fees, handling medical bills, or expanding your business, the choice is yours.

How does a loan against shares work?

The process is simple and efficient:

  • Pledging shares: You select the shares you wish to pledge as collateral.

  • Valuation: The lender checks the current market value of your shares. Based on this, you may get up to 50% of their value as a loan.

  • Interest rates: Since this is a secured loan, interest rates are lower than unsecured options.

  • Margin calls: If share prices fall below a set level, you may need to pledge more shares or repay part of the loan.

  • Loan disbursement: Once approved, the funds are credited directly into your account.

This is essentially how a loan against shares works, your investments stay intact while you gain access to much-needed funds.

Borrow smart retain ownership, enjoy dividends, and still get liquidity when you need it. Apply for loan against shares now

Key features of a loan against shares

Here is what makes it attractive:

  • Loan against a wide range of listed shares

  • Loan-to-value (LTV) typically up to 50%

  • Lower interest rates compared to unsecured loans

  • Flexible end use of funds

  • Quick processing and minimal paperwork

Loan Against Shares
Loan Against Mutual Funds

Advantages of a loan against shares

Why do many investors prefer this option?

  • Stay invested: You continue to own your shares and benefit from dividends.

  • Quick liquidity: Get funds in a short time without selling your holdings.

  • Affordable borrowing: Lower rates mean less strain on your finances.

  • Flexible repayment: Options like overdraft facilities make repayment easier.

Make your shares work twice keep them invested and unlock liquidity for today. Apply to get started

Risks and considerations when availing loan against shares

Every loan comes with responsibilities. Here is what you should keep in mind:

  • Market risk: Falling stock prices can reduce your eligible loan amount.

  • Margin calls: You may be asked to top up security if values dip.

  • Repayment discipline: Missing repayments can lead to pledged shares being sold.

  • Interest costs: Always calculate affordability before borrowing.

Who should consider a loan against shares?

This product suits:

  • Investors with long-term holdings who don’t want to sell

  • Business owners needing working capital

  • Individuals facing urgent medical or educational expenses

  • Anyone looking for cheaper alternatives to unsecured credit

Documents required for loan against shares

To apply, you will typically need:

  • PAN card
  • Identity proof (Passport, Aadhaar, Voter ID, etc.)
  • Address proof
  • Demat account details
  • Recent passport-size photograph

Interest rates and charges on loan against shares

A loan against shares comes with competitive interest rates and certain fees. Interest is charged only on the amount utilised. Other charges may include processing, maintenance, and penalties on overdue amounts.

Component

Typical range / Example

Interest rate

8% – 15% p.a.

Processing fee

Up to 4.72% of the loan amount

Annual maintenance

Up to 1.18%

Prepayment charges

Full pre-payment -

  • Sanction amount up to Rs. 5 Cr – Nil.
  • Sanction amount greater than Rs. 5 Cr – Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount as on the date of full pre-payment.

Part pre-payment -

  • Sanction amount Up-to 5 Cr – Nil.
  • Sanction amount greater than 5 Cr – Up to 4.72% (Inclusive of applicable taxes) of the principal amount of Loan prepaid on the date of such part pre-payment.


Benefits of taking a loan against shares

A loan against shares lets you unlock liquidity without selling your investments.

  • Quick access to funds without disturbing portfolio
  • Lower interest compared to unsecured loans
  • Pay interest only on the amount used
  • Continue earning dividends and capital gains
  • Flexible overdraft-style repayment
  • Fast processing with minimal documentation

Step-by-step process to apply for loan against shares

Applying is hassle-free. Here is how:

  1. Choose a lender and check their eligibility criteria.

  2. Submit an application online or at a branch.

  3. Provide necessary documents and Demat account details.

  4. Pledge your shares electronically through the depository system.

  5. Once verified, funds are disbursed to your account.

Loan against shares vs selling shares

  • Loan against shares: Retain ownership, earn dividends, and avoid capital gains tax until you sell.

  • Selling shares: Immediate liquidity, but you lose ownership and future gains.

For long-term investors, pledging shares often proves more rewarding.

Conclusion

A loan against shares is a practical way to secure funds without giving up your investments. It’s quick, flexible, and helps you stay invested while meeting urgent needs. But like any borrowing option, it requires careful planning, regular monitoring of pledged shares, and disciplined repayment.

Stay invested for tomorrow while unlocking liquidity today choose a loan against shares to balance growth and flexibility.

FAQs

How much loan can I get against my shares?

The loan amount depends on the lender’s loan-to-value (LTV) ratio, up to 50% of the current market value of your approved shares. Limits also vary based on your profile and the type of shares pledged.

Do I still receive dividends if my shares are pledged?

Yes, pledged shares remain in your name, so you continue to receive dividends, bonuses, and other corporate benefits. However, you cannot sell or transfer them freely until the loan is repaid or released by the lender.

What happens if I fail to repay the loan against shares?

If you default, the lender has the right to sell your pledged shares to recover dues. Additionally, penalties, higher interest charges, and damage to your credit profile may apply if repayment is delayed or missed.

Is it better to sell shares or take a loan against them?

Selling shares provides immediate liquidity but ends potential future gains. A loan against shares lets you access funds while staying invested, preserving dividends and growth opportunities. The choice depends on urgency, costs, and market outlook.

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