Understanding Loan Against Securities

Explore how a loan against securities is the kind of credit facility which can fix all your financial needs.
Understanding Loan Against Securities
3 mins
22 November 2023

What is loan against securities?

A loan against securities, as the name suggests, is a form of borrowing where individuals or businesses pledge their securities, such as shares, mutual funds, bonds, insurance policies, as collateral to obtain a loan. Essentially, it allows you to leverage your existing investments to access additional funds without the need to liquidate those investments. This approach is gaining popularity due to its flexibility and numerous benefits.

How do loans against securities work?

  1. Security valuation: When applying for a loan against securities, the lending institution evaluates the value and liquidity of the securities you intend to pledge. The loan amount is typically a percentage of the total value of the securities, and this percentage may vary depending on the type of the securities.
  2. Loan approval: Once the collateral is assessed, the lender determines the loan amount they are willing to extend to the borrower. The borrower then agrees to the terms and conditions, including the interest rate and repayment schedule.
  3. Loan disbursement: After the loan agreement is executed and securities are pledged, the funds are disbursed to the borrower. These funds can be used for various purposes, such as investment in a business, or covering personal expenses.
  4. Repayment: Borrowers are required to repay the loan according to the agreed-upon terms. The securities pledged as collateral are held by the lender until the loan is repaid in full. If the borrower defaults, the lender has the right to sell the securities to recover the outstanding amount.

Eligibility criteria for loan against securities

To qualify for a loan against securities, individuals typically need to meet certain criteria:

  • Ownership of securities: Borrowers must own eligible securities, such as stocks, mutual funds, or bonds, that can be pledged as collateral for the loan.
  • Loan amount: The loan-to-value ratio may vary, but borrowers often need securities worth more than the loan amount sought.
  • Age and residency: Some lenders may have age restrictions and require borrowers to be residents of the country where the loan is sought.

Fees or charges required for LAS

When availing a loan against securities, borrowers may encounter various fees and charges:

  • Interest rate: Lenders typically charge interest on the borrowed amount.
  • Processing fees: Lenders may impose processing fees for initiating the loan.
  • Penalties: Late payment or default may incur penalties.
  • Prepayment charges: Some lenders may levy charges if the loan is repaid before the tenure ends.

Factors affecting loan against securities interest rates

Several factors influence interest rates for loans on security:

  • Market conditions: Interest rates may fluctuate based on prevailing market conditions.
  • Lender's policies: Each lender sets its interest rates based on its risk assessment and cost of funds.
  • Borrower's profile: Creditworthiness, loan amount, and tenure can impact the interest rate offered.
  • Type of security: The type and quality of securities pledged may affect the interest rate.

Features of loan against securities

  1. Quick access to funds: Loans against securities offer a swift and convenient way to access capital without the lengthy approval process associated with traditional loans.
  2. Lower interest rates: These loans typically come with lower interest rates compared to personal loans or credit card debt because they are secured by liquid collateral.
  3. Retain investment portfolio: Borrowers can continue to benefit from the potential appreciation of their securities while using them as collateral for a loan.

Things to consider before availing loan against securities

Before opting for a loan against securities, individuals should consider the following factors:

  • Interest rate: Compare interest rates offered by different lenders.
  • Loan-to-value ratio: Understand the maximum loan amount relative to the value of pledged securities.
  • Repayment terms: Assess the repayment schedule and flexibility offered by the lender.
  • Risk of margin calls: In case of a decline in security value, borrowers may face margin calls or need to pledge additional securities.

Securities pledged as collateral for loan against securities

Various types of securities can be used as collateral for loans. Bajaj Finance Limited offers the following loans against securities:


A loan against securities is a valuable financial instrument that allows individuals and businesses to unlock the value of their investments without liquidating them. This method provides quick access to funds, often at lower interest rates, while enabling borrowers to maintain their investment portfolios. Whether you are looking to finance a business venture or meet personal financial goals, loans against securities offer a flexible and efficient solution for your capital needs. It is crucial to carefully assess the terms and conditions offered by different lenders and choose the one that best suits your requirements.


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*Terms and conditions apply

Frequently asked questions

How can I apply for a loan against securities?

You can apply online for a loan against securities with Bajaj Finance limited. Click here to begin your application process.

Can I avail a loan against securities without a CIBIL Score?

In many cases, a strong CIBIL Score is not a strict requirement for loans against securities. These loans are typically collateralised by securities, which reduce the lender's risk. However, some lenders may consider your credit score in assessing the terms and interest rates. A lower credit score might result in less favourable loan terms, but it does not necessarily disqualify you from getting a loan against securities.

Is salary mandatory to apply for loans against securities?

 No, salary is not typically required to apply for loans against securities. These loans are primarily secured by the value of your securities, and your income source is not a primary consideration. However, lenders may ask for proof of income or financial stability for their assessment, but it is usually not a strict requirement.

How much will the loan against securities cost me?

Fees and charges involved with loan against securities include interest rates, processing fees, annual maintenance charges.

  • Interest rate: The interest rate for loans against securities is generally lower than unsecured loans, making it a cost-effective borrowing option.
  • Processing fees: Lenders often charge a one-time processing fee when the loan is approved. The amount can vary between lenders.
  • Annual maintenance charges: Lenders might levy annual maintenance charges to cover the costs of managing your collateral.

These charges can vary between lenders and securities types. It is important to review the terms and conditions of the specific loan agreement to understand the exact costs involved.

What is a loan against securities (LAS)?

A loan against securities is a form of borrowing where individuals or businesses pledge their securities, such as shares, mutual funds, bonds, insurance policies, as collateral to obtain a loan.

How much loan amount can I get against my securities?

The loan-to-value ratio for loans against securities varies depending on the lender, type of collateral, and other factors. Bajaj Finance offers different loan-to-value ratios for shares (up to 50%), bonds (up to 95%), and mutual funds (up to 90%).

Is a loan against securities secured or unsecured?

A loan against securities is a type of secured loan. Secured loans are backed by tangible assets or collateral provided by the borrower.

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