Investing in India's capital markets is considered as a good financial decision. Even if you are just starting your journey into investment, these securities are some of the most recommended products by experts. Although the investment gains depend on market dynamics, they also help you get instant funds in times of emergency in the form of loans against securities. In this, you can use your securities as a collateral and obtain an instant loan against what you pledge. Read this blog post to learn more about loans against securities, and how to apply for it.
What is a Loan Against Security?
Loan Against Security (LAS) means pledging your shares as collateral to get the required funds instantly. With these types of loans, you can easily avail funds without redeeming your long term investments.
How Does It Work?
Since these are specifically loan against securities.These loans are available against these:
Equity/Demat Shares
Mutual Funds Units
Non-Convertible Debentures
Bonds
Insurance policies
So, let’s understand how these work. When we talk about loans against securities, once you have decided to pledge your securities, the lender provides an overdraft facility in your bank account. With an overdraft, you have the choice to withdraw any amount as per your requirement and again repay back the loan as per your convenience at an attractive rate of interest .
Benefits of Taking a Loan Against Security
Confused about securing a loan against mutual funds? Here are the key benefits:
Affordable interest rates
Loans against security offer low interest rates to borrowers. This is because it is a type of secured loan which has low rates as compared to unsecured loans. For the best rates, always compare various interest rates prevailing in the market and then decide as per your financial goals and requirements.
Flexible repayment methods
Overdraft means you can withdraw an amount of your choice from the sanctioned credit line or limit and you just need to pay a certain interest rate on it. The interest is also charged on the number of days the limit is withdrawn .The overdraft limit is decided by the bank depending on the value of your securities and also the credit assessment /policy .
Hassle-free loan processing
These loans do not require you to meet the regular eligibility criteria for loans offered by banks. Loans against security are secured loans and hence you do not need to fulfil conditions like credit score, income, etc. The eligibility purely depends on stock list and its value or the list of approved scrips. This makes the entire loan process easy and hassle-free. Therefore, these are good for instant funds.
Decent returns and dividends
When you take out a loan against securities, your investment units stay active in the market, allowing you to enjoy all the benefits of your investments. It means you still receive dividends from shares and interest from bonds, with the lender having no claim over these payments. As long as you make your loan repayments on time, you can continue earning from your investments.
How Does the Loan Application Work?
Here’s how the loan application process works:
Online Method
1. Go to the official websites of the leading banks in India such as ICICI Bank.
2. Find and click on the 'Apply Now' button for a loan against securities.
3. Fill in the necessary details as requested by the lender.
4. If you are eligible for a digital pre approved loan the entire loan can be disbursed in matter of few minutes
Offline Method
1. Go to the nearest bank branch offering the loan.or submit your contact information online so that the bank RM can get in touch with you .
3. A bank official will assist you with the loan application process.
4. The bank will verify your documents and details.
5. After verification, the loan amount will be disbursed to your bank account subject to credit assessment .
Documents Needed For The Loan
For Salaried And Self-Employed Borrowers
Valid Photo ID and Address proof as per KYC norms acceptable by bank
A copy of the PAN card
Bank statements of the last six months
Photograph
Any other KYC document as per the lender requirement
For Non-Individual Borrowers
Bank statements
KYC documents required for a Non individuals like Companies /LLP/Partnerships etc
Conclusion
Securing a loan can be a confusing task, especially when faced with the pressure of providing collateral or risking valuable assets. However, loans against securities offer a viable alternative that allows individuals to leverage their investments without liquidating them. In this blog, we delve into the intricacies of loans against securities, exploring how they work, their benefits, and the application process. Whether you are an experienced investor or a newcomer to the world of finance, this blog helps to demystify loans against securities and help you unlock the potential of your investments.
