Loan Against Securities Interest Rate, Factors, and How It Works

The Loan Against Securities (LAS) interest rate reflects the lender's assessment of the collateral and borrower risk.

Factors influencing the applicable rate

• Security type: Different securities carry different levels of liquidity and market risk.
• Security value: The value of pledged holdings can influence the sanctioned facility.
• Borrower profile: Credit history and repayment behaviour may affect pricing.
• Loan structure: Interest terms can vary between different facility structures.
• Market conditions: Prevailing lending conditions can influence applicable rates.
• Lender policy: Each lender determines rates according to its approved pricing framework.

Secured borrowing can generally offer lower rates than many unsecured credit facilities. However, borrowers should compare the complete borrowing cost rather than the interest rate alone. A lower advertised rate does not necessarily mean lower total cost when additional charges apply.

The Loan Against Securities rate of interest currently ranges from 7% to 12.25% p.a. for eligible shares and mutual funds.

The applicable rate can vary according to the security pledged and borrower profile.

Rates can change according to lender policy, security category, borrower profile, and prevailing conditions. For insurance-backed facilities, interest treatment can also differ between lock-in and lock-in-free policies.

A Loan Against Securities (LAS) combines secured borrowing with continued investment ownership.

Features

• Quick access: Eligible investments can provide a route to timely liquidity.
• Secured borrowing: Approved securities serve as collateral for the facility.
• Flexible utilisation: Applicable overdraft facilities allow borrowing according to requirements.
• Portfolio retention: Borrowers can continue holding pledged securities.
• Interest efficiency: Interest can apply to the utilised amount under applicable facilities.

• Market-linked collateral: Borrowing capacity can change when security values fluctuate.

  
  

Benefits

• Avoid immediate liquidation: Meet financial requirements without selling eligible investments.
• Potentially lower borrowing cost: Secured facilities can be more economical than unsecured alternatives.
• Flexible access: Use funds according to the sanctioned drawing power.
• Continued ownership: The pledged securities remain owned by the borrower.

• Portfolio continuity: Investments can remain exposed to market movements during the pledge period.

  
  

Why liquidate? Borrow against your securities and keep your investments working. Get started

The interest rate is only one component of the total borrowing cost. Other applicable charges can affect the overall cost of the facility.

For eligible share and mutual fund facilities, processing fees can be up to 4.72%, inclusive of applicable taxes.

For insurance-backed facilities, processing fees can differ and may be capped separately.

Borrowers should review the sanction letter and schedule of charges before accepting the facility.

The application process generally involves selecting eligible securities, completing verification, and creating the pledge.

Steps in detail: 

Step 1: Check whether your shares, mutual funds, or other assets are eligible.

Step 2: Enter your required personal and financial information.

Step 3: Complete identity, PAN, and KYC verification.

Step 4: Select the securities you intend to pledge.

Step 5: The lender evaluates the securities and determines the applicable borrowing limit.

Step 6: Review the sanctioned amount, interest rate, tenure, and applicable charges.

Step 7: Accept the applicable loan terms and complete the pledge process.

Step 8: Receive the funds after successful verification and pledge creation.

The exact digital process can differ according to the lender, security type, and borrowing facility.

Eligibility generally depends on the applicant's profile and ownership of approved securities.

Eligibility criteria

• Age requirement: The applicable age range depends on the lender and product.
• Approved securities: Only securities appearing on the lender's eligible list qualify.
• KYC compliance: Applicants must complete the required KYC verification.
• Ownership: The applicant must have valid ownership or rights over the pledged securities.
• Financial profile: The lender may assess repayment capacity and credit history.
• Resident status: Eligibility for resident individuals and other borrower categories depends on lender policy.

For example, some current securities-backed facilities specify an age range of 21 to 90 years.

Documents required

• Identity proof: Accepted KYC documents can include Aadhaar, passport, or voter ID.
• PAN card: Required for applicable financial and securities transactions.
• Demat statement: Used to verify ownership and holdings of pledged shares.
• Mutual fund statement: Relevant when eligible mutual fund units are pledged.
• Additional documents: Other supporting documents may be required during verification.

Applicants should submit updated and accurate documents to avoid unnecessary processing delays.

Several factors can influence the Loan Against Securities (LAS) interest rate offered to a borrower.

• Security type: Equity shares, mutual funds, and insurance policies carry different risk characteristics.
• Security quality: More liquid and stable securities may receive different pricing.
• Loan amount: The sanctioned amount can influence pricing under lender-specific policies.
• Borrower profile: Credit history and repayment behaviour can affect the applicable rate.
• Collateral value: Higher-value eligible collateral can affect the facility structure.
• Loan tenure: The duration and facility structure may influence pricing.
• Market conditions: Lending conditions can influence interest rate levels.

• Lender policy: Each institution follows its own approved pricing framework.

  
  

The final rate should always be checked in the sanction letter or loan offer.

Interest under many securities-backed facilities is calculated according to the utilised amount and applicable daily balance.

Simple example

Suppose your approved credit limit is Rs. 5,00,000, but you withdraw only Rs. 2,00,000.

• Interest is calculated on Rs. 2,00,000 rather than the entire Rs. 5,00,000.
• If you later use another Rs. 50,000, interest applies to the additional utilisation.
• After repayment, the interest-bearing amount reduces accordingly.

• The exact calculation depends on the lender's facility terms.

  
  

This structure can make the facility more efficient when you do not need the entire sanctioned amount. Borrowers should check whether interest is calculated daily and confirm the applicable method before accepting the facility.

Pay only for what you use that is the smart way to borrow. Apply now

A Loan Against Securities (LAS) can be considered when you require liquidity but want to avoid immediate investment liquidation.

• Medical requirements: Meet urgent expenses without selling investments immediately.
• Education expenses: Fund short-term education-related payments.
• Business cash flow: Address temporary working capital gaps.
• Emergency requirements: Access funds against available eligible collateral.
• Short-term opportunities: Meet time-sensitive requirements without disrupting investments.

• Temporary liquidity gaps: Use a secured facility instead of disposing of long-term holdings.

  
  

This facility may be less suitable when pledged securities are highly volatile or repayment capacity is uncertain.

Responsible management can help control interest costs and reduce collateral-related risks.

• Borrow only what you need: Avoid using the entire sanctioned limit without necessity.
• Compare total costs: Review interest, processing fees, and other applicable charges.
• Monitor collateral value: Track market movements affecting pledged securities.
• Maintain repayment discipline: Timely repayments can help avoid additional charges.
• Review the Loan-to-Value ratio: Ensure sufficient collateral remains available.
• Choose suitable tenure: Balance borrowing flexibility with the total interest cost.
• Maintain liquidity: Keep sufficient funds available for scheduled repayments and shortfalls.

A Loan Against Securities (LAS) can provide liquidity without requiring immediate sale of eligible investments. Current rates for eligible shares and mutual funds range from 7% to 12.25% p.a. The applicable rate depends on the security pledged, borrower profile, facility structure, and lender policy. The overall borrowing cost also includes processing fees and other applicable charges.

Understanding how interest is calculated can help borrowers manage utilisation efficiently.

Your investments can support today while still building tomorrow. Apply for a loan against securities today!