Loan Against Shares FAQ (Frequently Asked Question)

Obtaining a loan against shares (LAS) is viable when time is of the essence. This helps when you need rapid capitalization. You can use shares, mutual funds, LIC insurance, and postal savings certificates as collateral to obtain fast cash.

There has been a flurry of fundraising efforts as of late, perhaps due to global uncertainty. For example, you need to send your kid to college in another country. So, it’s wise to take out a loan against shares. This is good even if you don’t need the money immediately. If you have a substantial investment portfolio, especially one with equities, you may be qualified for a loan against shares. This investing leverage might help you out financially.

Explain how it works

The vast majority of new Demat account holders have yet to determine whether they will eventually be able to take advantage of the account’s many features. If you have stock assets that you plan to hold for the foreseeable future, you should consider getting a loan against your equity investment. These loans against securities let investors meet deficit funding needs while keeping significant capital for long-term goals.

1) What steps do I take to get a stock-backed loan?

A Loan Against Shares from several financial institutions may be obtained in just three minutes and three easy procedures. Applying for a loan is a completely digital experience. It means you can do it from the comfort of your home or office. 

How to Apply for a Loan Using Shares

Step 1: Choose the securities you want to pledge in NetBanking.

Step 2: Confirm your agreement with an OTP.

Step 3: Verify an OTP. Pledge stocks and mutual funds online. Withdrawals from your LAS account happen instantly.

Following the application for the digital loan against shares

• Combination of many financial institutions Demat account with a checking or savings account
• Trades of stocks and equity mutual funds held in Demat format
• Method of operation for a single Demat account
• bank-approved stock with a value greater than Rs. 2 lakh

2) “How much money can I borrow against my shares?”

You might receive anywhere between INR 1 lakh and INR 20 lakh. It’s possible to take out a loan for up to half of your stock’s worth. It has a fixed interest rate of 9.90%. Get the funds right away. Interest should only be added to the funds that are being utilized.

3) Loans against securities are available to whom?

Anyone with legally recognised securities can apply for a loan against shares, regardless of whether they live in India. You must be a financial institution customer to complete the transaction digitally. Several financial institutions provide loans against securities interest rates to proprietors, partners in enterprises, corporations, and limited liability partnerships.

4) How much interest do I pay on loans secured by collateral?

Financial institutions have low-interest rates for loans secured by collateral. Interest rates are influenced by the MCLR rate, which measures the marginal cost of providing new funds for lending. Get in touch with the bank to determine the current rate. The great thing about this loan against shares is that it is an overdraft on your account, so you only have to pay interest on the money you spend.

5) What kinds of documentation are required to borrow money against stock?

Financial institutions’ customers know that the process takes little time and requires little documentation. It is not sufficient to submit the certificates for the securities you wish to pledge; you will also need proof of your identity, residency, and income.

6) Can I use any property I own as collateral to secure a loan?

Nonconvertible debentures, life insurance policies, stock, mutual fund shares (both equity and debt), National Savings Certificates, Kisan Vikas Patras, and National Savings Certificates are all acceptable forms of collateral.

7) What kinds of stocks may be used as security?

Pledgeable assets include fully paid-for shares of publicly traded companies. These stocks must be easily transacted and have a high degree of liquidity. 

• When will I hear back from financial institutions about my loan application?

The time it takes to approve and handle the loan against shares depends on how long it takes to verify the borrower’s income and other financial information.

• How long can I expect this loan to last?

The loan tenure ranges from 6 to 36 months.

• How does one decide which repayment option to use?

It is contingent upon the loan arrangement (overdraft vs. demand). The latter has yet to have a predetermined repayment plan in place. With an overdraft agreement, you have less access to funds during the life of the loan.

• I would like to know if I can apply for a loan at any local SBI bank.

The loan could be secured in a variety of ways.

• How do financial institutions’ offerings differ from loans against shares provided by other financial institutions?

Interest rates at financial institutions are among the lowest in the industry. There are new regulations for loans backed by stocks and bonds issued by financial institutions in India.

8) Consider getting a loan by using your shares as collateral.

Stocks are a popular investment option because of the potential for high returns over the long term. An initial public offering (IPO) is a way to buy company shares and profit from their future success. As a result, the potential for future capital growth and financing has increased. More reasons to take out a loan against shares are as follows.

• It makes sense to get a loan backed by shares while the market is doing well.
• A share-secured loan can be used for any purpose.
• As an overdraft, you can get one of these loans. If you put up shares as collateral for a loan against shares, the lender will authorise a certain amount for you to borrow. Borrowers may use the approved total in any way they see fit.
• Payback of the loan can be done whenever the borrower likes, up until the overdraft limit is reached.
• Interest is calculated solely on the borrowed sum until the loan is repaid.

Conclusion:

A loan against shares is comparable to any other loan in that you can borrow up to the value of the assets you already hold as collateral. Additionally, the borrower retains all rights to earnings (such as share appreciation, dividends, incentive payments, etc.) during the loan term. Visit Piramal Housing Finance for more queries.