Loan Against Securities: Sometimes in times of emergency, we need money immediately. In such a time, instead of selling your investment, taking a loan against securities is a better option. Although the process of Loan Against Securities is a bit slow, but still through this you can take a loan at affordable interest rates. Any type of securities can be pledged to raise funds, such as shares, equity or debt mutual funds, insurance policies and bonds. It is very useful when there is an urgent need of cash for any personal or business related needs. Loan Against Share (LAS) is a very popular method for short and long term loans.
How to get Loan Against Securities
Before taking a loan through this, you should check whether the lenders accept the securities held by you or not. Most lenders usually have a list of securities on their website. They are ready to accept only the securities on this list. Also, in the case of equities, a lender can give 50 or 60 per cent of the value of the securities as debt, although it can be higher in the case of debt funds or bonds. Some lenders also ask for additional securities in case the value of the securities falls during the loan tenure.
Important things related to LAS
- One of the major advantages of this is that even when you pledge your securities with the lender, it keeps on growing over time and in the meantime, you can meet your needs by taking a loan without selling your investment.
- Industry experts believe that this is a better approach than liquidating your investments. In this, interest, bonus and dividend etc. continue to be available on your investment during the loan tenure.
- Loans against shares include stock exchange securities.
- If the borrower fails to pay, the lender can settle the securities and recover the loan.
- Loans against shares include stock exchange securities such as government securities, corporate securities and debentures.
- These LAS are short term loans. Usually the repayment period is up to 36 months.
- In some banks, you also get the option of flexible repayment. You can choose to repay the loan interest every month and the principal amount at the end of the loan tenure under this option.
- Loan Against Security also comes with different charges – for example, in addition to processing charges, stamp duty, pledge creation fee etc. may be levied on the loan agreement to a borrower depending on the loan provider.
- In India you can apply for Loan Against Shares in banks like Axis Bank, ICICI Bank, HDFC Bank, State Bank of India etc.