Loan Against Shares

Loans Against Securities 101: A Beginner’s Guide

Some tough times call for immediate as well as sudden financial assistance. In such circumstances, loans from financial institutions come to the rescue. If the individual possesses investments, there is an option to take a loan against such assets or securities. 

A loan against securities is usually for a short period, and the quantum of loans is small. You can get these loans against the following collateral:

  • NABARD Bonds
  • UTI Bonds
  • Mutual fund units
  • Demat shares

These are secured loans where the deposits are the collateral. These loans are easily obtainable at every financial institution and can be availed by the customers. They help one to stay afloat in times of financial turmoil.

How do these loans work?

These are usually accessible as an overdraft facility in a customer’s account after the securities are deposited. One can draw money from the report and pay interest only on the loan amount and the period the loan is utilized. Most institutions offer competitive loans against securities interest rates ranging between 10-18%. 

How can one benefit from availing of these loans?

The loan allows borrowers to monetise investments without selling them instantly, thus immediately increasing their net worth. Here are some ways in which an individual can benefit from putting up securities as collateral for a loan:

  • Quick availability
  • Not relying on credit score
  • Flexibility in repayment
  • Low-interest rates 

These benefits make this loan type highly popular and coveted. Being a secured loan, you also get longer tenures and better interest rates, further increasing this loan’s popularity. Ensure you have the best loan experience with informed decision-making and careful consideration of your chosen loan provider!

Must Read: Top Benefits Of Loan Against Securities

How to Avail a Loan Against Shares, Bonds, and Debentures

loan Against Shares

Loans against share helps you take advantage of your investments and use it for further financing. Additionally, it fulfils people’s contingencies and helps them liquidate investments without selling them. Some things to consider before taking the loan against shares are:

Things to Consider Before Opting for Loan Against Shares:

  • Take a loan against shares and debentures (equity) only if you are expecting full compensation through benefits and need the loan to fulfil the need for funds in the interim period. 
  • In case of reinvestment of this loan, ensure that the advantages are equal to/more than the costs you incurred. 

For your better understanding, the steps of the procedure are as follows:

  • One can pledge shares, units, bonds, and even policies to avail a loan against policy. 
  • After you have submitted the application, including all the share certificates and relevant documents, the lender will open an account in your name. 
  • The loan is sanctioned, and the borrower is informed of the interest rate which is only charged on the number of days you have utilised the funds. 
  • The loan amount is based on 2 factors, the first is the extent of financing in a specific stock. The second factor is the value of the stock upon evaluation. 

The loan for one borrower does not usually exceed Rs.20 lakhs, as per the RBI’s rules for loans against security of shares and maximum 10 lakhs for equity bonds. 

Fullerton India specialises in loans against shares. We offer flexible repayment tenures and competitive interest rates so that you can ensure your financial health!

Additional Read: What is loan against demat shares? Point’s to Check Before Applying

A Complete Guidelines About Loan Against Shares

Loan Against Shares is the loan where you can pledge the securities you have invested in the form of collaterals like Bonds, Mutual Funds, shares. One can get the overdraft (OD) and line of credit (LOC) Facility under this loan.

It provides liquidity against investments which makes it more popular than others. The procedure for availing the Loan Against Shares is simple and easy.

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Advantages:

  • No Payment charges.
  • No Foreclosure charges.
  • Minimum Documentation.
  • Fast Process.
  • No hidden charges.
  • Lower interest rates.
  • Use the amount for any use.

Eligibility Criteria:

  • India citizenship.
  • Age must be 21 years.
  • Must be salaried or self-employed.

Documents Required:

  • Identity Proof.
  • Address Proof.
  • IT returns
  • Signature Proof.
  • 2 recent photographs.

Additional Read: Everything You Need To Know About Loan Against Shares

Read More: 8 Questions To Ask Before Taking a Mortgage Loan