A loan against securities (LAS) is a type of secured loan where an individual can borrow money by pledging their financial securities as collateral. These securities could be shares, bonds, mutual funds, or government securities. Borrowers retain ownership of the securities and continue to receive dividends or interest, but the lender holds the securities as collateral until the loan is repaid. This loan provides easy access to funds without selling investments, making it an attractive option for investors needing liquidity for personal or business purposes.
Eligibility criteria for Loan Against Securities
To qualify for a loan against securities, borrowers must meet specific criteria set by the lending institution. These typically include:
Income eligibility
Stable income: A regular income is essential to assure the lender of your repayment ability.
Income proof: Submission of income documents such as payslips, bank statements, or income tax returns.
Portfolio value: Minimum Rs. 50,000
Age criteria
Minimum age: The applicant must be at least 18 years old.
Maximum age: This may differ from lender to lender. Bajaj has a age limit of upto 90 years for Loan Against Securities.
Securities acceptable for loan
Lenders accept a wide range of securities for loan approval. These include:
Equity shares: Publicly traded shares listed on recognised stock exchanges.
Mutual funds: Both equity and debt mutual funds can be pledged.
Bonds and debentures: Government and corporate bonds are commonly accepted.
Exchange-Traded Funds (ETFs): Some lenders accept ETFs as collateral.
Government securities: G-Secs or treasury bills are also accepted by certain lenders.
The exact securities accepted may vary by the lender, and their value will determine the loan amount offered.
Required documents for loan against securities
Applying for a loan against securities involves submitting various documents to confirm your identity, address, and financial standing.
Identity proof
Passport
Aadhaar Card
PAN Card
Driving License
Address proof
Utility Bills (e.g., electricity or water bills)
Voter ID
Ration Card
Passport
Financial documents
Bank statements for the last 6 months
income proof (payslips, ITR, or proof of business income)
Documents showing ownership of shares, bonds, or mutual funds
Application process
To apply for a loan against securities, follow these steps:
Select a lender: Choose a bank or financial institution that offers loan terms best suited to your needs.
Submit an application: Fill out the loan application form, either online or in person.
Pledge securities: The lender will ask you to pledge the securities as collateral.
Verification: The lender will assess your eligibility based on the value of the securities, your income, and your credit history.
Loan approval: If the loan is successfully verified the lender will approve the loan amount.
Disbursal of funds: The loan amount is credited to your account, and you continue to hold ownership of the pledged securities.
Conclusion
A loan against securities is a convenient option for individuals needing quick funds without liquidating their investments. Understanding the eligibility criteria, acceptable securities, and required documents will ensure a smooth application process. By using your financial assets as collateral, you can access low-interest loans while maintaining your investment portfolio’s potential growth.
