Loan against Shares and Securities
Loan against shares and securities is a loan where you pledge your shares, mutual funds or life insurance policies or bonds as collateral to the bank against your loan amount. These loans are very useful in times when cash is needed urgently for any personal or business requirement. Loans against shares are a popular form of getting short or long term loans and the repayment period extends to up to 36 months. The list of securities against which one can get a loan will differ from lender to lender and loan amount can range between Rs.50,000 to Rs.20 lakh.
Many investors build portfolios of bonds, deposits, equity shares and mutual funds. When faced with an unexpected requirement, they feel unsure about whether to raise funds or liquidate investments. They are also worried about rebuilding the asset. Loan against shares (LAS), a facility offered by banks and non-banking finance companies, can serve as a good alternative for fast and easy finance.
Features of Loan against Shares
The following are the features of loan against shares
- Loan provided against shares include stock exchange securities and securities approved by the lender.
- The security provided acts as a protection for the loan.
- If the borrower fails to make payment, then the lender can dispose the security and realize the debt.
- Secured advances offers a sense of safety to the lender as the amount lent can be regained.
- Loans offered against shares include stock exchange securities such as government securities, corporate securities and debentures.
The interest rate on Loan against Shares is lower than that of a personal loan or a credit card, since it is secured by collateral. Interest is charged monthly, on the basis of the daily outstanding balance in the overdraft account.
Loan against shares is offered to:
- Salaried Individuals
Demand Loan: To be liquidated in maximum period of 36 months
Overdraft : Running Overdraft (subject to renewal every year)
Banks provide a complete list of approved securities against which they are willing to offer a loan. A lien is created against these securities in order for the loan to be taken. The value of loan is a percentage of the value of the securities, which can be anywhere between 50% (for equity shares), and 90% (for bank deposits).
Leading Lenders offering Loan against Shares
- Axis Bank
- ICICI Bank
- HDFC Bank
- State Bank of India
- Bajaj Finserv
- Kotak Mahindra Bank
- Yes Bank
Banks open a current account in your name with an overdraft facility. The borrowing limit is set based on the value of the shares. You get a loan up to 50% of the value of the shares. Borrower can withdraw loan from the account whenever they choose, and can repay it by depositing the amount back into the current account. The process is simpler and more flexible than that of an EMI-based term loan.
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