Loan Against Securities – Interest Rates, Eligibility and How to Apply
A loan against securities is a type of loan you can avail of for your financial needs. Loans are credit facilities offered by banks, NBFCs, and other financial institutions. They help you meet your financial obligations without diminishing your investments that earn returns for the future. Whether you want to buy a home, a car or meet any personal or business-related need, a loan gives you access to the funds you need.
Let’s take a look at all the details about loans against securities. Read on!
What is Loan Against Securities?
Loans against securities is a type of personal loan available against the different types of assets or investments you have. You can use the loan to meet any kind of personal or business-related need that you might have. This is a secured loan as you must pledge your investments to avail the funds.
How does a Loan Against Securities Work?
In a loan against securities, you pledge a security or an asset that you own. These include the following –
- Shares and stocks
- Fixed deposits
- Mutual fund investments
- Insurance policies
The loan amount is determined based on the aggregate value of the securities you have pledged. After the value of your securities has been determined, you are offered a loan as an overdraft facility wherein a credit limit is specified up to which you can withdraw funds. Interest is charged on the amount that you actually withdraw and not on the granted credit limit.
For instance, say the quantum of loan against equity shares allowed against your investments is Rs.2 lakh. You would be allowed an overdraft limit of this amount. If you withdraw Rs.1 lakh, interest would be payable only on the withdrawn amount of Rs.1 lakh and not on the limit of Rs.2 lakh.
Banks and NBFCs that offer a Loan Against Securities
Different banks and NBFCs offer a loan against securities. Here’s a look at some of the popular NBFCs and banks for a loan against securities available in the market –
| Name of the bank or NBFC | Loan amount | Loan interest rate | Loan tenure |
| HDFC Bank | 50% to 80% of the value of the pledged securities | Up to 14.11% | Depends on the loan availed |
| Bajaj Finserv | Up to Rs.10 crores | Up to 12% per annum | 3 to 12 months |
| ICICI Bank | Up to Rs.5 crores | Up to 10.3% | Depending on the loan availed |
| SBI | 5% to 50% of the value of the security pledged | Depends on the security pledged | Depends on the security pledged |
| Tata Capital | Rs.5 lakhs to Rs.20 crores | 10.5% onwards | Depends on the security pledged |
Features of Loan Against Securities
A loan against securities has some salient features, which are as follows –
- Usually, the loan is offered as an overdraft facility. However, some lenders also allow the term loan option, wherein you can repay the loan in EMIs.
- The loan’s quantum differs across the different types of securities that you pledge. Mutual funds might offer you loans up to 50% of their value, while fixed deposits and National Savings Certificates can offer up to 80% of their value as loans.
- In the case of an overdraft, interest is charged only on the amount you withdraw. However, in the case of term loans, interest is charged on the full amount of the loan sanctioned.
- A processing fee is payable when you apply for the loan.
You would have to fulfil the loan against mutual funds eligibility parameters set by the lender to qualify for the loan.
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Eligibility for Loan Against Securities
The eligibility parameters for a loan against securities differ across lenders. However, some of the common parameters are as follows –
| Age | Usually, lenders offer the loan to borrowers who are 21 years or older |
| Nationality | The loan is available to Indian residents |
| Occupation | You can be a self-employed individual or a salaried one having a regular source of income |
| Security value | Lenders might require you to have securities of a minimum value to apply for the loan |
Documents required for Loan Against Securities
Like eligibility parameters, the requirement of documents also depends on the lender. However, the common documents required for the loan are as follows –
- Proof of identity like your Voter’s ID Card, PAN Card, Passport, Aadhaar Card and the like
- Proof of address like utility bills, rent agreement, property document, passport, Aadhaar card and the like
- Proof of income like salary slips, IT returns, and the like
- Proof of the security that is being pledged for the loan
- Passport size photograph of the borrower
- Proof of age like birth certificate, passport, voter’s ID card, and the like
How to Apply for Loan Against Securities?
Applying for a loan against securities is quite simple. You have two modes of applying for the loan. One is the offline mode, and the other is the online mode. The process to apply for the loan under each of these modes is as follows –
1. Offline Process
To apply offline, you can visit the lender’s branch office and make an application. The application form will be available at the branch office. Fill out the application form stating all the details. Attach your documents and pay the processing fee to apply for the loan. Submit the application form with the documents and fee, and the branch will scrutinize your application. The loan would be sanctioned if you fulfil the eligibility parameters and the form is successfully verified.
2. Online Process
The online process of applying for a loan against securities is the easiest and most convenient. You can simply visit the lender’s website, fill up an online application form, pay the processing fee online and submit your application. Your application is assessed and verified in real-time and if it is successfully verified, the loan would be sanctioned.
Many lenders have also designed their mobile application form where you can apply for a loan against securities through your smartphone.
Points to Remember before Applying for Loan Against Securities
While a loan against securities offers you the funds needed without liquidating your assets, there are some aspects of the loan that you should remember. These aspects are as follows –
- Different lenders might accept various forms of securities for the loan. Some might accept only shares, while others might allow mutual funds too. So, assess the lenders and the security that they accept. Choose a lender that offers the loan against different types of securities so you can pledge security at your discretion.
- Compare the loan against securities interest rates across lenders. Choose a lender with the lowest rates for the most affordable loan option
- Choose a lender that offers the maximum quantum of loan against the security’s value
- Ensure that you fulfil the loan against securities eligibility parameters before you apply for the loan. If you do not qualify for any parameter, the loan application would be rejected.
- Besides the interest rate, there are other fees and charges associated with the loan too. Check these fees and charges to know the exact cost of the loan
What is a Digitized Loan Against Securities?
The internet has revolutionized the lending ecosystem as banks and NBFCs have gone online. Now you can transact online and even apply for loans through the lender’s website or mobile application. A loan against securities is also available online and when you apply online it is called a digitized loan.
So, under digitized loan against securities, you apply online and the loan is sanctioned in your account online in real-time. The repayment is also done online through digital payment modes and you can track your loan digitally.
Final Word
A loan against securities offers funds for your financial needs against the pledge of your investments. You don’t have to liquidate any security. Just pledge it and get a loan against it. This helps you preserve your security, earn interest, and get funds against it. If you don’t want to pledge your securities or are looking for an alternative source of finance, you can choose Navi Personal Loans. Navi cash Loans offer quick and instant funds up to Rs.20 lakhs without collateral security. The interest starts at 9.9%, and you get a tenure of up to 6 years for repaying the loan. Download the Navi app now!
FAQs
Ans: The margin requirement depends on the security pledged. Banks and NBFCs might have a margin requirement ranging from 20% to 50% of the pledged security.
Ans: No, the processing fee is a one-time non-refundable fee that you have to pay when you apply for the loan against securities.
Ans: Yes, self-employed professionals can apply for loans against shares. However, they should have a source of income, fulfil the eligibility parameters and have eligible securities to pledge for the loan.
Ans: Lenders usually offer up to 80% of the security’s value as a loan.
Ans: No, the loan against securities interest rates is fixed in nature. Floating rates are not available.
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