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.
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.
You can pledge the following types of securities:
Applying for a loan against shares and securities is a structured process, and typically includes the following steps:
Research and compare lending institutions to find the one that offers the terms, interest rates, and services that align with your needs.
Lenders will have specific eligibility criteria, which often include a minimum value of the securities to be pledged, your credit score, and income.
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.
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.
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.
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.
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.
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).
Securities refer to financial assets like shares, mutual fund units, or bonds that you can pledge as collateral to obtain a loan.
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.
You can use shares, mutual fund units, certain bonds, and debentures as collateral 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.
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.