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
Eligibility criteria of loan against shares
To apply for a loan against shares, borrowers must meet certain basic eligibility conditions set by lenders. These criteria ensure that the pledged shares are suitable as collateral and that the borrower has the capacity to service the loan comfortably. Here are the key eligibility requirements include:
- Eligible shareholding: You must own listed, approved equity shares that are accepted by the lender for pledging. The shares should be held in demat form.
- Minimum age criteria: Applicants are generally required to be at least 21 years old at the time of application.
- Stable financial profile: A steady income source or strong financial background helps demonstrate repayment ability.
- Demat account ownership: Shares must be held in your own demat account and should be free from prior pledges or encumbrances.
- Acceptable loan-to-value (LTV): The loan amount depends on the market value and volatility of the pledged shares.
- KYC compliance: Completion of identity and address verification is mandatory before loan approval.
For a detailed understanding of requirements, documentation, and share eligibility, you can refer to the loan against shares eligibility criteria before applying.
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
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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.
|
Step-by-step process to apply for loan against shares
Applying for a loan against shares is hassle-free. Here is how:
- Choose a lender and check their eligibility criteria.
- Submit an application online or at a branch.
- Provide necessary documents and Demat account details.
- Pledge your shares electronically through the depository system.
- 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.
