Benefits of Loan Against Securities

Explore the feature and benefits of taking a loan against your securities. Know the application process and many more in detail.
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3 mins read
09-July-2025

When exploring financing options for personal or business needs, one innovative solution is a loan against shares. This type of loan allows borrowers to leverage their investment in stocks by using them as collateral for a loan, without the need to liquidate their holdings. This financial strategy can be particularly advantageous for investors who expect their shares to appreciate in value or yield significant dividends over time. By opting for a loan against shares, you can access funds for immediate needs while retaining your investment position in the market.

Features of loan against shares

  • Flexible loan amounts: The loan amount typically depends on the value of the shares being collateralised.
  • Repayment flexibility: These loans often come with flexible repayment options, allowing borrowers to choose a schedule that best suits their financial situation.
  • Revolver facility: Some lenders offer a revolving credit facility, where you can withdraw and repay funds according to your cash flow needs.
  • Online management: Most financial institutions provide online tools to manage your loan, track your securities, and monitor loan balances.
  • Flexible Tenures: Convenient tenure and repayment options starting from 7 days up to 36 months.
  • Continue earning your dividends: You keep earning dividends on your shares while availing loan against shares.
  • Only pay interest on the loan amount utilised: Pay interest only on the amount you've withdrawn and for the period utilised. You need not pay EMIs on the total approved loan amount.
  • All third-party DP shares are acceptable: All companies or DPs (Depository participants) DEMAT accounts are acceptable with us for a loan against shares.
  • Extra credit for increased share value: If the value of your share appreciates during the loan tenure, the pre-assigned loan limit will increase accordingly. Conversely, a decrease in share value will proportionally reduce the pre-assigned loan limit. This adjustment ensures that the “Sanction limit” remains unbreached.
  • Swap pledged shares when required: You have the flexibility to swap the pledged shares at any point of time during the tenure of your loan against shares.
Loan Against Shares
Loan Against Mutual Funds

Benefits of loan against securities

  • Immediate liquidity without selling assets
    One of the primary benefits of taking out a loan against securities is the ability to gain immediate liquidity without having to sell your valuable assets. This can be particularly beneficial during volatile market conditions where selling assets might result in losses.
  • Lower interest rates
    Loans secured against shares generally come with lower interest rates compared to unsecured loans. This is because the lender has a lower risk due to the collateral backing the loan.
  • No impact on investment gains
    Borrowing against your securities allows you to continue earning dividends and capital gains on your investments, as you still hold ownership of the shares.
  • Quick processing and disbursal
    Loans against securities are often processed and disbursed more quickly than other types of loans, given that the collateral is readily quantifiable and easily liquidated if necessary.

Eligibility criteria for Loan Against Shares

Anyone can apply for our loan against shares online, as long as they meet the four basic criteria mentioned below. Also keep a few documents handy while applying for loan against shares.

  • Nationality: Indian
  • Age: 18 to 90 years
  • Employment: Salaried, self-employed
  • Portfolio value: Minimum Rs. 50,000

How to apply for a loan against shares?

Applying for a loan against shares involves a straightforward process. Initially, you need to ensure that the shares you own are approved by the lender for such a loan. It is important to assess the terms and conditions offered by different institutions to find the most favorable deal.

Documentation

You will need to prepare and submit various documents, including proof of ownership of the shares, identity proofs, and financial statements.

Loan valuation

The lender will assess the current market value of your shares to determine the amount of loan you can secure.

Application review

Once you submit your application along with all required documents, the lender will review it to ensure compliance with their criteria before approving the loan.

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

  1. Eligibility check: Verify your eligibility for the loan, including the types of securities that can be pledged.
  2. Select a lender: Choose a financial institution that offers competitive interest rates and terms.
  3. Documentation: Gather all necessary documents such as latest share statements, identity proof, and financial records.
  4. Application submission: Submit the application form along with the documents to the lender either online or at a branch.
  5. Loan processing: The lender will evaluate your application, perform the necessary checks on the securities, and assess your financial health.
  6. Loan disbursal: Upon approval, the loan amount will be disbursed into your designated account.

Conclusion

A loan against shares can serve as a powerful tool in your financial arsenal, offering liquidity while allowing you to retain your investment benefits. It is essential to understand the terms and conditions thoroughly and choose a lender who offers the flexibility and rates that align with your financial goals. Always consider your ability to repay the loan to avoid any adverse impact on your financial health.

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Frequently asked questions

What are the features of a loan against shares?
A loan against shares offers several distinctive features. It allows borrowers to leverage their investment in shares to secure funding without selling the shares. The loan amount is usually a percentage of the shares' market value, typically ranging from 50% to 70%. Interest rates for these loans are generally lower than unsecured loans due to the collateral offered. Additionally, the disbursement process is quick, providing liquidity to the borrower. However, it's important to note that if the market value of the pledged shares falls significantly, the borrower may need to provide additional collateral or repay part of the loan.
What securities can be pledged for a loan against shares?
The securities that can be pledged for a loan against shares typically include shares of publicly traded companies, mutual fund units, and bonds. Lenders often have a specific list of approved securities that qualify for these loans. The eligibility of the shares is usually determined based on their liquidity, trading volume, and stability in the market. It's essential for borrowers to verify with the lender which securities are accepted before proceeding with the loan application.
What are the benefits of a loan against shares?
The benefits of a loan against shares include immediate liquidity without the need to liquidate your investment. This type of loan provides an opportunity to meet urgent financial needs while keeping your investment portfolio intact. The interest rates are usually more favorable compared to unsecured loans, making it a cost-effective borrowing option. Additionally, the repayment terms can be flexible, allowing borrowers to manage their cash flow more efficiently. It also enables investors to potentially increase their return on investment by not selling their shares during market lows.

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