All About Loans Against Shares
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All About Loans Against Shares

  • Highlights

  • Loans taken by providing shares as collateral are loans against shares

  • A current account is opened in your name when you avail this loan

  • There is no restriction on its usage

Banks and financial institutions are always looking for new ways to meet the growing demand for funding. One such method is loan against securities. These securities could be gold, FDs, insurance schemes, shares you hold, etc.

What are loans against shares?

When you borrow the loan by providing the shares you hold as security, then the loan is called a loan against shares. These shares are not sold to the bank, merely pledged to them and the borrower continues to get the shareholder benefits like rights, bonuses, dividends, etc. You can also get an overdraft against the shares you pledge. However, the loan amount and the overdraft amount both depend on the value of the shares, and may be anything between 50% to 70% of the value of the shares.

However, not all shares can be pledged for a loan. Lenders usually have a very specific set of shares that they provide money against. These shares are usually very liquid, from top companies, and highly valued securities.

How do they work?

When you apply for a loan against shares, on most occasions a current account is opened in your name with an ATM card, personalized cheque book, and even mobile and internet banking facilities. This allows you to withdraw cash as required.

However, with Bajaj Finserv, it is a hassle-free online process wherein a dedicated relationship manager guides you with all your queries. The customer portal – Experia allows you to easily take disbursement, make repayment, and provides a comprehensive view of your account. Moreover, since these are secured loans, these interest rates are lower as compared to unsecured loans.

With pre-approved offers from Bajaj Finserv, availing finance has become even easier. All you have to do is provide some basic information and you can get your exclusive pre-approved offers.

Eligibility and documents

The shares that can be pledged vary from one institution to another. Each bank and financial institution has their own list of shares that can be pledged. Shares held in the names of HUF, minors, companies and NRIs cannot be pledged; only those held by adult individuals are eligible.

To borrow, you need to fill a pledge request form with the details of the shares you’re going to pledge and submit that to the bank or institution. You also need to provide the following document along with your application:
- Identity proof/ residence proof
- Income proof like a salary slip,
- Recent bank statements of the last 6 months
- PAN card
- Cancelled cheque
- Holding statement from the depository participant

Features of the loan

You can avail these loans for anything from household expenses, to marriage, to higher studies, and so on. They don’t usually have prepayment charges and come with an overdraft facility. Moreover, the shares are evaluated weekly to assess their value. As with any loan having a repayment plan in place before applying will make approval easier.

Loan Against Shares Application Form

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