Loan Against Shares vs Selling Shares – Which is Better?

If you own shares and need urgent funds, you may find yourself at a crossroads should you sell your investments or take a loan against shares? Both choices can unlock liquidity, but the impact on your wealth, returns, and financial control differs significantly. Before you decide, it’s important to understand how each option works, what you gain, and what you risk losing.

Looking for instant liquidity without selling your portfolio? Get a loan against shares and retain your market advantage.

Selling shares means liquidating part or all of your investment to raise funds. The process is straightforward you sell your holdings on the stock exchange, and the sale proceeds are credited to your account within a couple of days. 

However, while this gives you immediate liquidity, it also ends your ownership of those shares. You lose potential dividends, voting rights, and the chance to benefit from future market appreciation. In some cases, selling shares during a market dip can even lead to capital losses.

A loan against shares (LAS) is a type of secured loan where you pledge your shares as collateral to access funds. The lender offers a percentage of your shareholding value, usually up to 50% as a loan.

You continue to hold ownership of your shares, which means you can still benefit from dividends, bonuses, and market appreciation. The only catch is that the lender holds the pledged shares until you repay the loan.

Interest is charged only on the amount you utilise, and once you repay, your pledged shares are released back to you.

Retain your investments and get liquidity fast. Apply for a loan against shares today.

Here is a side-by-side comparison to help you understand how both options differ across major factors.

In most short-term situations, taking a loan against shares can be more financially strategic, as it preserves your investment base and potential growth.

While selling may look cost-free, the tax and opportunity costs can often outweigh the nominal interest charged on a loan.

Avoid capital gains and retain your wealth get funds through a loan against shares instead of selling.

While LAS is an effective way to access liquidity, it’s important to understand the potential risks involved:

• Market volatility: If share prices fall, the lender may ask you to add more collateral or repay part of the loan.
• Interest accumulation: If not repaid on time, interest can add up and increase your liability.
• Limited eligibility: Only approved shares from eligible companies can be pledged.

These risks can be managed easily by monitoring your portfolio and keeping some repayment buffer.

Selling shares may seem simple, but the true cost lies in the opportunities you lose:

• Missed market rallies: Once you sell, you cannot benefit from future price appreciation.
• Loss of dividend income: Regular income from dividends stops immediately.
• Reduced compounding effect: Selling breaks the long-term compounding cycle of your investments.
• Tax outflow: Capital gains tax reduces your net realised value.

In short, the money you save today might cost you much more tomorrow if markets rise.

Let us take an example: Suppose you hold shares worth Rs. 10 lakh. You need Rs. 5 lakh for an urgent expense.

If you sell shares

• You get Rs. 5 lakh instantly but lose ownership of those shares.
• If the market appreciates by 15% next year, your sold shares could have been worth Rs. 5.75 lakh.
• You also pay capital gains tax, reducing your real earnings.

If you take a loan against shares

• You get Rs. 5 lakh as a loan while your shares continue to grow.
• You pay interest, say Rs. 50,000 a year, but your portfolio value remains intact.
• After repaying, your assets are fully restored, along with any appreciation.

Clearly, in most cases, a loan against shares helps preserve long-term wealth while solving immediate liquidity needs.

Eligibility for a loan against shares depends on a few simple conditions:

• Age: Usually between 21 years to 90 years.
• Ownership: Shares must be held in a demat account in your name.
• Approved securities: Only shares approved by the lender are eligible for pledge.
• Minimum value: Typically, a portfolio worth Rs. 50,000 or more can be pledged.

With most lenders offering digital applications and instant approval, the process is seamless and quick.

While a loan against shares is ideal for most short-term needs, there are scenarios where selling may be more practical:

• Market overvaluation: If you believe your stock has peaked and may decline soon.
• Portfolio rebalancing: To move funds into more promising investments.
• No repayment capacity: When you cannot afford to service a loan or pay interest.
• Permanent liquidity need: For major goals like home purchase or long-term commitments.
• Avoiding loan obligations: If you prefer a debt-free approach.

In all other cases, leveraging your shares for liquidity can help you maintain both stability and growth.

Both loan against shares and selling shares can provide liquidity when you need it most. The right choice depends on your financial goal, market outlook, and repayment ability. If your need is short-term and you wish to stay invested, a loan against shares offers flexibility, ownership retention, and continued growth potential. However, if your investment goals have changed or the market outlook weakens, selling may be a better strategic exit.

Preserve your portfolio and get funds instantly. Apply for a loan against shares today.