Loan against Securities is a loan where you pledge your shares, Mutual Funds or Life Insurance policies as collateral to the bank to get a loan. Loans Against Securities are an overdraft facility which is pledged against financial securities like shares, units and bonds. These Shares, Bonds or Mutual Funds which one holds are pledged as collateral for the loan amount. A Loan Against Securities is an excellent means to make your investments work harder and smarter for you. The amount of loan can range from Rs 5 lacs to Rs 20 crores with the additional benefits of quick processing and attractive interest rates.
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How do Loans against Securities work?
Once you deposit the securities you own, you can receive Loan Against Securities as an overdraft facility in your account. Money can be then drawn from the account, and you only pay interest on the loan amount you use and for the period you use it. Say you are offered a Loan against Shares of Rs 5 lakhs and you withdraw Rs 1,00,000 and deposit the amount back in your account in one month. In such a situation, you are liable to pay interest only for one month on Rs 1,00,000. Here the amount of loan eligibility depends on the value of the securities you have to offer as collateral
Four reasons why Loan Against Securities is beneficial –
- You get instant access to funds when you pledge your securities to take the loan, without having to liquidate the investments that you have made over the years.
- One of the biggest advantage of Loan against Securities is that you pay interest only on the amount that has been availed. It is otherwise used as an overdraft facility.
- You get to retain ownership of the securities. At no point do you have to liquidate your investments or securities. Even after having them pledged your securities, you can continue to reap benefits that come from your investments as you still enjoy the ownership of the financial products.
- It has easy documentation process where only basic KYC documents are required, which makes the process of availing Loan against Securities hassle free.
Features and advantages –
- Loan Amount – This loan is offered on approved Scripts for up to 50% of the market value and for the Mutual Funds to the extent of up to 70% of the Net Asset Value (NAV).
- Swift Approval – You have quick access to funds when you need them the most with swift processing procedures.
- Security Swap- There is flexibility to swap securities based on your stock market assessment, and you also continue to reap the benefits of dividends, bonus and rights issues.
- Additional Finance – You can also avail additional finance on your loan against securities by pledging more shares or mutual fund units.
- Easy Repayment – You are only required to pay interest every month on the amount you have availed, whereas the principal needs to be repaid at the end of the term.
Digital Loan against Securities
Digital loan against securities is an innovative new product which automates and significantly speeds up the process of getting a loan against shares in just 3 simple steps. The process is completely online, and you don’t even have to step out of your office or home.
Benefits of Digital Loan Against Securities
- Instant disbursal if you apply via Net Banking
- Pay interest only on the amount you use
- Low-interest rate and processing charges
- Set your own loan limits (Rs 1 lakhs – Rs 20 lakhs)
- No need to submit any documents
- Choose the shares and Mutual Funds you want to pledge, and enjoy the flexibility to change them in the future
- No prepayment penalty
High loan to collateral value