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Loans Against Securities: Meaning, Types, How to Apply

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Created on
October 6, 2023


What’s Inside

Whether you're a seasoned investor looking to leverage your portfolio or someone exploring avenues for securing a loan, this comprehensive guide will delve into the meaning, types, and step-by-step process of how to apply for loans against securities. 

What is a Loan Against Securities?

A Loan Against Securities is a financial product where you pledge your financial securities, such as shares, mutual fund units, or bonds, as collateral to obtain a loan from a bank or financial institution. This type of loan allows you to leverage your investments to meet various financial needs, from personal expenses to business capital.

Types of Securities You Can Pledge

You can pledge the following types of securities:

  • Shares held in dematerialised form with depositories like NSDL or CDSL.
  • Mutual Fund Units under your primary ownership.
  • Certain types of bonds and debentures are also accepted as collateral.

How to Apply for a Loan Against Securities?

Applying for a loan against shares and securities is a structured process, and typically includes the following steps:

Step 1. Choose A Lender

Research and compare lending institutions to find the one that offers the terms, interest rates, and services that align with your needs.

Step 2. Assess Your Eligibility

Lenders will have specific eligibility criteria, which often include a minimum value of the securities to be pledged, your credit score, and income.

Step 3. Pledge Your Securities

You'll need to open a demat account if you don't have one and transfer your securities to this account. Then, you can pledge them as collateral for the loan.

Step 4. Fill the Loan Application

Complete the loan application form provided by the lender. Ensure you provide accurate details about the securities you're pledging, the loan amount required, and the purpose of the loan.

Step 5. Evaluation and Loan Approval Stage

The lender will evaluate the value of the securities you've pledged and approve your loan based on a percentage of this value. This is known as the loan-to-value (LTV) ratio.

Step 6. Disbursement

Upon approval, the loan amount will be disbursed to your bank account. You can use these funds for your intended purpose, whether it's paying for education, medical expenses, or business expansion.

Step 7. Repayment

Loans against securities typically have a predetermined tenure. You'll need to repay the loan amount along with interest as per the agreed-upon schedule.

Interest Rates on Loans against Securities

  • Interest rates on loans against securities can vary between lenders. 
  • They typically fall in the lower range compared to unsecured personal loans because they are backed by collateral. 
  • However, the specific rate depends on factors such as the type of securities pledged, the loan amount, and the lender's policies.

Benefits and Considerations of Loans Against Securities


  • You can access funds without liquidating your investments, allowing them to continue to grow.
  • Loans against Securities generally offer lower interest rates compared to unsecured loans, making it cost-effective.
  • The process is streamlined, with quick approval and disbursement of funds.


  • If you fail to repay the loan, the lender may liquidate your pledged securities to recover the outstanding amount.
  • While interest rates are lower, you'll still incur interest expenses on the loan.
  • Ensure you meet the lender's eligibility criteria, as not all securities or individuals may qualify for such a loan.

Instant Loans to Meet Your Financial Needs

Not all securities qualify for a loan to be disbursed against them. However, you can avail an instant personal loan to address your financial requirements. Fi Money provides instant loans that arrive directly in your savings account. These are pre-approved personal loans made available to select users with good credit scores. On Fi, this process is 100% paperless, and the loans are provided at competitive interest rates — where each user remains in control with complete visibility of all details. Plus, you can avoid EMI late fees by setting up automatic in-app payments. Our licensed partner bank assigns an eligible loan amount to each user (up to ₹5 lakh).

Frequently Asked Questions 

1. What exactly are "securities" in the context of a loan against securities?

Securities refer to financial assets like shares, mutual fund units, or bonds that you can pledge as collateral to obtain a loan.

2. How does the process of obtaining a loan against securities work?

You begin by choosing a lender. Then, you pledge your securities, complete an application, and upon approval, receive a loan amount based on the securities' value. Thereafter, you repay the loan as per the agreed terms.

3. What types of securities can be used as collateral for such loans?

You can use shares, mutual fund units, certain bonds, and debentures as collateral for loans against securities.

4. What are the typical interest rates and repayment terms for loans against securities?

Interest rates vary but are generally lower than unsecured loans. Repayment terms depend on the lender but are typically structured over a predetermined tenure.

5. Are there any risks or downsides to consider when opting for a loan against securities?

If you fail to repay, your pledged securities may be liquidated to cover the outstanding amount. Additionally, you'll incur interest costs on the loan. Assess your financial situation and needs carefully before opting for this loan.


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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Loans Against Securities: Meaning, Types, How to Apply


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