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!
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.
In a loan against securities, you pledge a security or an asset that you own. These include the following –
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 If you withdraw Rs.1 lakh, interest would be payable only on the withdrawn amount of Rs.1 lakh and not on the limit of Rs.2 lakh.
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|
A loan against securities has some salient features, which are as follows –
You would have to fulfil the loan against mutual funds eligibility parameters set by the lender to qualify for the loan.
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|
Like eligibility parameters, the requirement of documents also depends on the lender. However, the common documents required for the loan are as follows –
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 –
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.
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.
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 –
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.
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 Personal 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!
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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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.