When exploring financing options for personal or business needs, one innovative solution is a loan against shares. This type of loan allows borrowers to leverage their investment in stocks by using them as collateral for a loan, without the need to liquidate their holdings. This financial strategy can be particularly advantageous for investors who expect their shares to appreciate in value or yield significant dividends over time. By opting for a loan against shares, you can access funds for immediate needs while retaining your investment position in the market.
Features of loan against shares
- Flexible loan amounts: The loan amount typically depends on the value of the shares being collateralised.
- Repayment flexibility: These loans often come with flexible repayment options, allowing borrowers to choose a schedule that best suits their financial situation.
- Revolver facility: Some lenders offer a revolving credit facility, where you can withdraw and repay funds according to your cash flow needs.
- Online management: Most financial institutions provide online tools to manage your loan, track your securities, and monitor loan balances.
- Flexible Tenures: Convenient tenure and repayment options starting from 7 days up to 36 months.
- Continue earning your dividends: You keep earning dividends on your shares while availing loan against shares.
- Only pay interest on the loan amount utilised: Pay interest only on the amount you've withdrawn and for the period utilised. You need not pay EMIs on the total approved loan amount.
- All third-party DP shares are acceptable: All companies or DPs (Depository participants) DEMAT accounts are acceptable with us for a loan against shares.
- Extra credit for increased share value: If the value of your share appreciates during the loan tenure, the pre-assigned loan limit will increase accordingly. Conversely, a decrease in share value will proportionally reduce the pre-assigned loan limit. This adjustment ensures that the “Sanction limit” remains unbreached.
- Swap pledged shares when required: You have the flexibility to swap the pledged shares at any point of time during the tenure of your loan against shares.
Benefits of loan against securities
- Immediate liquidity without selling assets
One of the primary benefits of taking out a loan against securities is the ability to gain immediate liquidity without having to sell your valuable assets. This can be particularly beneficial during volatile market conditions where selling assets might result in losses. - Lower interest rates
Loans secured against shares generally come with lower interest rates compared to unsecured loans. This is because the lender has a lower risk due to the collateral backing the loan. - No impact on investment gains
Borrowing against your securities allows you to continue earning dividends and capital gains on your investments, as you still hold ownership of the shares. - Quick processing and disbursal
Loans against securities are often processed and disbursed more quickly than other types of loans, given that the collateral is readily quantifiable and easily liquidated if necessary.
Eligibility criteria for Loan Against Shares
Anyone can apply for our loan against shares online, as long as they meet the four basic criteria mentioned below. Also keep a few documents handy while applying for loan against shares.
- Nationality: Indian
- Age: 18 to 90 years
- Employment: Salaried, self-employed
- Portfolio value: Minimum Rs. 50,000
How to apply for a loan against shares?
Applying for a loan against shares involves a straightforward process. Initially, you need to ensure that the shares you own are approved by the lender for such a loan. It is important to assess the terms and conditions offered by different institutions to find the most favorable deal.
Documentation
You will need to prepare and submit various documents, including proof of ownership of the shares, identity proofs, and financial statements.
Loan valuation
The lender will assess the current market value of your shares to determine the amount of loan you can secure.
Application review
Once you submit your application along with all required documents, the lender will review it to ensure compliance with their criteria before approving the loan.
Step-by-step guide to apply for loan against shares
- Eligibility check: Verify your eligibility for the loan, including the types of securities that can be pledged.
- Select a lender: Choose a financial institution that offers competitive interest rates and terms.
- Documentation: Gather all necessary documents such as latest share statements, identity proof, and financial records.
- Application submission: Submit the application form along with the documents to the lender either online or at a branch.
- Loan processing: The lender will evaluate your application, perform the necessary checks on the securities, and assess your financial health.
- Loan disbursal: Upon approval, the loan amount will be disbursed into your designated account.
Conclusion
A loan against shares can serve as a powerful tool in your financial arsenal, offering liquidity while allowing you to retain your investment benefits. It is essential to understand the terms and conditions thoroughly and choose a lender who offers the flexibility and rates that align with your financial goals. Always consider your ability to repay the loan to avoid any adverse impact on your financial health.
