Exploring financial options can lead you to discover versatile solutions like taking a loan against shares. This type of loan can be an excellent choice for those who need immediate funding but do not wish to liquidate their investments. A loan against shares is a type of secured loan where you pledge your shares as collateral to borrow money. This allows you to access funds without selling your shares. The loan amount is typically a percentage of the market value of the shares pledged.
Here’s why you might consider it:
- Immediate liquidity: Quickly access funds without selling your investments.
- Retain investment benefits: Continue to benefit from potential appreciation and dividends.
- Lower interest rates: Enjoy more favorable rates due to the secured nature of the loan.
- Simplified processes: Benefit from straightforward and flexible procedures.
For more details on how you can leverage your investments through a loan against shares, consider how this option fits into your broader financial strategy.
Know all about loan against shares process
The process of obtaining a loan against shares is designed to be streamlined and user-friendly, allowing borrowers to leverage their shareholdings as collateral. Initially, the borrower must ensure their shares qualify under the lender’s criteria, which typically include a list of approved securities. Once eligibility is confirmed, the borrower needs to submit an application accompanied by necessary documents like share certificates and proof of ownership. The lender then assesses the current market value of the shares and determines the maximum loan amount based on a pre-decided Loan-to-Value (LTV) ratio. Following approval, the funds are disbursed, directly into the primary borrower’s bank account, providing quick liquidity while allowing the borrower to retain ownership and any dividends or appreciation on their shares.
Eligibility criteria for Loan Against Shares
Anyone meeting the following criteria can apply for a loan against shares online:
- Nationality: Indian
- Age: Between 18 and 90 years old
- Employment: Salaried or self-employed
- Portfolio value: Minimum of Rs. 50,000
Reasons to avail loan against shares
- Quick access to funds: Ideal for urgent financial needs without disrupting your investment strategy.
- Cost-effective: Generally offers lower interest rates compared to unsecured loans due to the collateral offered.
- Financial flexibility: Allows you to tap into the value of your investments without the need for selling, preserving your long-term financial goals.
Step-by-step guide to apply for Loan Against Shares
Here's a step-by-step guide to applying for a loan against shares:
- Initiate the application: Begin the process by clicking on the "Apply" button.
- Provide personal details: Enter your personal information, including your name, PAN, date of birth, and contact information.
- Verify your email: Provide your email address and verify it to proceed.
- Specify securities: List the specific securities (shares) you wish to pledge as collateral for the loan.
- Loan offer evaluation: Your provided information will be assessed to generate a personalized loan offer tailored to your needs.
- Complete KYC verification: Undergo the Know Your Customer (KYC) verification process to receive a sanction letter.
- Set up repayment: Establish an electronic mandate to automate the repayment of your monthly installments (EMIs).
- Accept agreement and consent: Accept the loan agreement terms and provide your consent for loan sanction and disbursement.
- Pledge your shares: Pledge the specified shares as collateral to finalize the loan amount.
- Loan disbursement: Once the verification process is complete, the loan amount will be credited to your designated bank account.
Documents required
Proof of Identity (only one)
- Passport
- Aadhaar Card
- Voter's ID Card
- Driving Licence
- Letter from the National Population Register
- NREGA Job Card
Proof of Address (only one)
- Aadhaar Card
- Utility Bills
- Passport
Proof of Income (only one)
- Salary Slips
- Bank Statements
- Income Tax Returns
Proof of Shareholding (only one)
- Demat Account Statement
- Share Certificates
Key points to consider before applying
- Market volatility: Fluctuating share prices can impact the loan.
- Interest rates and fees: Compare offers from different lenders.
- Loan tenure: Choose a tenure that suits your repayment capacity.
- Margin calls: Be prepared to deposit additional funds if needed.
- Liquidity of shares: Ensure easy saleability of pledged shares.
- Tax implications: Consider potential tax benefits or liabilities.
- Emergency fund: Maintain a fund for unexpected expenses.
- Diversification: Avoid pledging all valuable shares.
Conclusion
Opting for a loan against shares can be a strategic financial decision, especially if you are looking to manage cash flow without diluting your investment portfolio. This type of loan combines the benefits of accessibility, cost-effectiveness, and investment retention, making it a compelling choice for investors. By understanding the process and taking advantage of the convenience of online applications, you can quickly leverage your shareholdings for immediate financial needs while continuing to participate in the potential upside of your investments.
