Loan Against Securities: What You Need to Know

Welcome to Bankboi.com, In this article, we will discuss what you need to know about loan against securities. There are many times when financial requirements can arise, such as for medical emergencies, business investments, or other unexpected expenses. For such scenarios, taking a loan against securities is a viable option for many.  

Loan Against Securities: What You Need to Know

     This type of loan is secured against existing investments, such as mutual funds, stocks, bonds, or property. It can be used to raise short-term capital and is usually offered at a lower interest rate than other types of loans. Here, we will discuss the advantages and disadvantages of taking a loan against securities, and the eligibility criteria that one needs to meet. We'll also look at the different types of loan against securities and the paperwork involved. 

   By the end of this article, you will have a clear understanding of loan against securities – the advantages and disadvantages, eligibility criteria, and the paperwork involved. You'll also know the different types of loan against securities available and how to go about applying for one. So, read on to learn more about loan against securities.

 What Is Loan Against Securities?

      A loan against securities is a type of loan that is secured against a borrower’s assets such as stocks, bonds, and other investments. The loan is used to cover short-term financial needs such as medical expenses, home repairs, or any other financial need. 

   Generally, when a loan is taken against securities, the asset is held by the lender as collateral until the loan is repaid. In exchange for the loan.

A loan against securities is a financial instrument that allows an individual or business to borrow money against the value of securities such as stocks, bonds, mutual funds, and ETFs held in a brokerage account. The loan is made by a lender who places a lien against the securities, which secures repayment of the loan. The borrower is given a cash advance and the lender holds the securities as collateral in case the borrower fails to repay the loan.

Advantages of Loan Against Securities - 

 There are many advantages when applying for a loan against securities, some of them given below.

1. Low Interest Rates: One of the main advantages of a loan against securities is that it typically comes with lower interest rates when compared to other types of loans. This is because you are using your securities as collateral for the loan and the lender is confident that they can recoup the loan amount if you default. 

2. Quick Approval: Another benefit of loan against securities is that it can generally be approved quicker than other types of Loan.

3. Minimum documentation: In order to avail Loan against Securities very few documents require. Such as Demat Account Statement, PAN Card etc.

4. Easy eligibility criteria: If you are looking for Loan against Securities keep in mind if you have Active Demat Account and sufficient Balance (Shares Holdings) in it. You are eligible for loan against Securities.  

5. Quicker loan disbursal: It takes less time to get approval and disbursal.

6. Online loan application facility: You can apply this type of loan online.

7. Tax benefits: You get loan and also enjoy while you use loan amount. 

8. Easy to Apply: As we already mentioned that Loan Against Securities is easy to apply and get disbursal. You can even apply for Loan Against Securities online and get approval. 

9. Lower rate of interest: You will Enjoy Lower Rate of Interest if you get loan against Securities. 

10. Faster processing Faster cash availability

11. Flexible Repayment Options: You get Flexible loan Repayment Facility in case you avail loan against Securities.

12. No Income Proof Required: Generally, you need to reveal Income proof to get loan but if you are taking Loan Against Securities no income proof is required in order to avail the loan.

Disadvantages of Loan Against Securities 

   Sometimes taking out a loan against securities can be a wise move, and sometimes it is not. Let's see why...

1. You may lose Securities: If the borrower is unable to make the repayments of loan taken against securities, the lender can sell off their securities.

2. Lower Loan than Expectation: You can avail of the loan amount up to 60% to 75% of your portfolio's value.

3. Processing Fees: You need to Pay Processing Fees. Processing fee is applicable on the amount that is sanctioned.

4. Review Charges: Sometimes you need to pay Review Charges 

5. Interest Rate: Interest rates are differed from bank to bank.

Eligibility Criteria for Loan Against Securities -

1) Have an active trading and Demat account 

2) Have sufficient balance (Holdings Value) in the trading account

3) Minimum net-worth of securities 

4) Knowledge of the current market prices of the securities 

5) Must be over 18 years of age 

Check your eligibility criteria before approaching the bank for a loan against securities

Conclusion 

     In conclusion, loan against securities is an increasingly popular option for those looking for quick and easy access to liquidity. With the right information and research, it can be a great way to access funds without having to liquidate existing investments. With the right financial advisor, you can ensure you make the best decisions for your specific financial goals.

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