Things to consider before applying for a loan against shares

Know the important factors to check before applying for a loan against shares and make a smarter borrowing decision.
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3 mins
07-November-2025

We have all been there. Whether it's a sudden medical bill, a new business opportunity, or your child's upcoming wedding sometimes you need funds that your savings alone can't cover. At this point, most people dip into their savings or look for unsecured loans. But here’s a smarter alternative: a Loan Against Shares (LAS). It’s one of the few borrowing options that lets you keep your investments intact and still access liquidity when you need it most.

What is a loan against shares?

A loan against shares (LAS) is a type of secured loan where you pledge your shares as collateral to access quick funds without selling your investments. Instead of liquidating your portfolio during a market dip or when you need urgent liquidity, you can leverage the value of your shares to meet personal or business expenses. Once pledged, the lender marks your shares under lien and sanctions a loan based on a percentage of their market value, known as the Loan-to-Value (LTV) ratio. You continue to remain the owner of the shares and are entitled to dividends and bonuses while the loan remains active. This form of credit offers flexible withdrawal, interest-only servicing, and quick approval making it an ideal choice for those seeking short-term liquidity while staying invested in the market.

What makes it stand out?

Unlike unsecured loans, a loan against shares and securities allows you to:

  • Avoid liquidation of your portfolio
  • Continue earning dividends
  • Enjoy lower interest rates
  • Access emergency funds quickly

Do you know? You can get a loan against shares of up to Rs. 5 crore by submitting just 3 documents. Sounds simple? It actually is.

But before you apply, here are a few things to consider before taking a LAS to ensure you’re making the best borrowing decision possible.

Why choose a loan against shares? Key advantages

A loan against shares helps you unlock the value of your investments without selling them. It offers instant liquidity, flexible usage, and cost-efficient borrowing making it a smart choice for both investors and professionals seeking quick funds. Key advantages:

  • Instant liquidity: Access funds quickly without liquidating your shares, allowing your investments to keep growing.

  • Flexible usage: Use the loan amount for business expansion, emergencies, or personal needs — with no end-use restrictions.

  • Quick and easy process: Enjoy a smooth, mostly digital application with minimal documentation and fast disbursal.

  • Interest on used amount only: You are charged interest only on the portion you withdraw, keeping your costs in check.

  • Overdraft flexibility: Withdraw, repay, and reuse funds freely within your sanctioned limit.

  • Retain market gains: Stay invested and continue earning potential dividends and appreciation on your pledged shares.

  • Lower interest rates: Being a secured loan, it typically offers more affordable rates than unsecured credit options.

Key things to consider before applying for loan against shares

A loan against shares is one of the most efficient ways to raise quick funds without parting ways with your investments. Whether you’re facing a temporary cash crunch or need to fund an emergency, this facility lets you leverage your existing securities without selling them. But before you go ahead, it’s important to understand what you’re signing up for. From eligibility to fees and documentation, here's everything you need to know to make a smart and confident borrowing decision.

Loan Against Shares
Loan Against Mutual Funds

1. Understand the eligibility criteria

The first step in securing a loan against shares and securities is ensuring you fit the eligibility criteria. While lenders may tweak their policies slightly, some requirements remain consistent across the board. The eligibility benchmarks are:

  • Nationality: You must be an Indian resident.
  • Age: You should be between 21 and 90 years
  • Employment: Both salaried professionals and self-employed individuals can apply.
  • Security value: You must pledge shares worth at least Rs. 50,000.

Since it’s a secured loan, your financial track record is not scrutinised as aggressively as it is for unsecured loans. Your pledged shares act as a buffer, giving lenders confidence in your repayment capability.

No complex paperwork. No rigid barriers. Apply now and get funds fast.

2. Check the interest rate and all applicable fees and charges

One of the most important things to consider before taking a LAS is how much it will cost you. The interest rate is obviously a major factor, but that’s not the whole picture. Make sure to review:

  • Processing fees
  • Foreclosure or part-prepayment charges
  • Annual maintenance fees or renewal charges
  • Penalties on delayed payments

Each of these can add to your total cost of borrowing. That’s why it’s crucial to compare lenders—not just on the basis of interest rate, but also on overall fee structure. Bajaj Finance Limited stands out by offering competitive interest rates and a transparent fee policy that’s easy to understand and budget for.Know more about loan against shares interest rate and processing fees

3. Loan-to-Value ratio (LTV)

The Loan-to-Value (LTV) ratio is a simple yet vital concept in the world of loan against shares. It refers to the percentage of your share value that you can borrow against. For instance, if your shares are worth Rs. 10 lakh and the 50% LTV, you can borrow up to Rs. 5 lakh.

This ratio is governed by SEBI regulations and ensures a balanced risk approach for lenders. Lenders usually offer up to 50% LTV, meaning you don’t have to sell your shares to get access to funds. You continue to enjoy ownership benefits such as dividends and capital appreciation, all while meeting your financial needs.

4. Loan amount and tenure

One of the standout features of a loan against shares is its built-in flexibility. Unlike traditional loans, where the full disbursed amount begins to accrue interest from Day 1, LAS works more like an overdraft. You’re only charged interest on the amount you use, not the entire sanctioned limit.

In addition, you get a flexible loan tenure of up to 36 months, giving you breathing space to plan your repayments. Whether you need to borrow for a few weeks or a couple of years, this structure adapts to your timeline. This is especially useful for business owners or individuals dealing with temporary liquidity issues.

Enjoy flexible borrowing with zero pressure. Apply now

5. Required document in loan against shares

While the application process for many loans can be tedious, loan against shares offers a much more streamlined experience. Most lenders, including Bajaj Finance Limited, ask for a minimal set of documents. Here’s what you’ll typically need:

  • Your PAN card
  • A valid address proof (such as Aadhaar, passport, or utility bill)
  • Bank account details for disbursal and EMI repayment
  • Your Demat account holding statement to verify the value and ownership of pledged shares

You can complete the application and verification process online in just a few steps. For urgent financial requirements, this quick turnaround time can be a major advantage.

6. Shares loan interest rate and fees

The interest rate for a loan against shares is typically lower than unsecured loans since your shares act as collateral. Rates may vary depending on the value and type of shares pledged, loan amount, and borrower profile.

Apart from interest, minimal processing fees and charges may apply, including account setup or lien marking fees. However, there are generally no hidden costs, making it a transparent and affordable borrowing option.

7. Repayment strategy and risks in loan against shares

A loan against shares is usually offered as an overdraft facility, giving you the flexibility to repay anytime within the tenure. Interest is charged only on the amount utilised, helping you manage your cash flow efficiently.
 
Here is the complete Information about : what are the documents required for loan against shares

Should you break your investments or opt for a loan against shares?

When you are in urgent need of funds, the instinctive reaction is often to liquidate your investments. However, doing so might mean missing out on future market gains or disrupting your long-term wealth goals. A loan against shares (LAS) offers a smarter, more strategic alternative. Here is why opting for LAS can be a better choice than breaking your investments:

  • Preserve ownership: You retain your shares, continuing to earn dividends and benefit from market appreciation.

  • Avoid market timing risk: Selling during a market dip can lock in losses pledging keeps you invested.

  • Faster access to funds: LAS disbursals are typically quick and digital, ideal for urgent liquidity needs.

  • Cost-effective borrowing: Interest rates are lower than unsecured loans or credit cards.

  • Flexible repayments: Repay at your pace, with the freedom to prepay anytime without penalties.

In short, a loan against shares helps you stay invested while accessing immediate liquidity, making it an efficient bridge between wealth creation and short-term cash flow needs.

Conclusion

Choosing a loan against shares is a smart move when you need funds but don’t want to disturb your long-term investments. Whether it's for a medical emergency, business opportunity, or sudden expense, this option ensures you get access to emergency funds while retaining ownership of your portfolio. However, like any financial product, it’s crucial to assess every angle eligibility, interest rates, fees and charges, loan tenure, and documentation before you hit ‘apply’. With a clear understanding and the right lender, a LAS can become your go-to financial tool for managing short-term liquidity needs without compromising your future goals.

Turn your shares into ready capital without selling a single unit. Apply for a loan against shares today

Frequently asked questions

What is the maximum loan I can get against my shares?

The loan amount you can avail depends on the Loan-to-Value (LTV) ratio and the total market value of your pledged shares. Bajaj Finance Limited offers up to 50% of the share value as a loan. For example, if your eligible shares are valued at Rs. 5 lakh, you can avail up to Rs. 2.5 lakh as a loan.

Will I still earn dividends on the shares I pledge?

Yes. Even though your shares are pledged, you retain ownership of them. This means you will continue to earn dividends, bonuses, and other corporate benefits during the loan tenure, as long as they are credited directly to your Demat account.

Can I prepay or close my loan early? Are there any charges?

Yes, you can prepay or foreclose your Loan Against Shares at any time. Bajaj Finance Limited offers this flexibility with minimal or no prepayment charges, making it a convenient option for short-term liquidity needs.

How quickly can I get funds after applying for a Loan Against Shares?

If all documents are in order, and the pledged shares are from an approved list, Bajaj Finance Limited can process and disburse your loan within 24 to 48 hours. The process is fully digital for faster turnaround.

Can I pledge shares that are part of an ESOP/unvested?

No, you cannot pledge unvested ESOPs as collateral since they are not yet owned by you. Only vested ESOPs that have been allotted and are held in your demat account can be pledged.

What hidden fees should I watch out for when applying for LAS?

Look out for processing fees, annual maintenance charges, documentation charges, and possible penalties on overdue interest or early closure. Always review the loan agreement carefully before signing.

How can I reduce the effective cost of a loan against shares?

You can reduce costs by opting for a lender offering competitive interest rates, maintaining a healthy margin to avoid top-ups, paying interest on time, and using the overdraft facility wisely to pay only for what you use.

What happens in case of a margin call?

If share prices fall and the loan-to-value ratio exceeds the limit, you will receive a margin call. You must either pledge additional shares or repay part of the loan to restore the required margin.

Is a loan against shares a secured or unsecured loan?

A loan against shares is a secured loan, as your pledged shares act as collateral. This reduces the lender’s risk and helps you access funds at a comparatively lower interest rate.

What happens if I fail to repay the loan on time?

If repayment isn’t made on time, the lender may sell your pledged shares to recover dues. It can also impact your credit score and affect future borrowing eligibility.

What types of shares are eligible for pledging?

Only listed, dematerialised shares held with recognised depositories (like NSDL or CDSL) are eligible for pledging. The lender also provides a list of approved securities for loan eligibility.

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