Loan Against Security

Loan Against Security Service By WinRich Professional Services Pvt Ltd

Thinking of selling your shares or mutual funds to meet a financial emergency? Don’t! The pathbreaking loan against securities allows you to instantly raise money against your shares without selling them!

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Loan against securities is a loan where you pledge your shares, mutual funds or life insurance policies as collateral to the bank against your loan amount. Loan Against Securities are typically offered as an overdraft facility in your account after you have deposited your securities. You can draw money from the account, and you pay interest only on the loan amount you use and for the period you use it.

For example, you are offered a loan against shares of Rs 2 lakhs. Let’s say, you draw Rs 50,000 and deposit the amount back in your account in one month. In this case, you are liable to pay interest only for one month on Rs 50,000.

What does Loan Against Security cover?

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Benefits Of Loan Against Securities

High loan amount- Loan against Securities offers loan amount as high as 10 crores.

Lower Interest Rates- The interest rates of Loan against securities is lower as compared to Credit Cards or personal loans. It varies from bank to bank and usually ranges between 9% – 15%.

Lower Installment- Loan against securities offers an option of paying only the interest amount as EMI and the principal amount can be paid at the end of the tenor or even earlier, whenever the customer has sufficient funds to pay back the loan amount.

Also, the interest is calculated only on the amount withdrawn and not on the entire approved loan amount.

No Liquidation of securities- With Loan against securities, the returns on investments are not hurt. Therefore, by giving securities as collateral you kind of raise money without any cost. Since, there is a great chance that interest that you are earning from your securities is covering the nominal interest that you are paying for the loan.

No Hidden Cost- There are no hidden charges to get a Loan against Securities. Usually there is an upfront payment, or processing fees, all of which are disclosed at the time of application.

Unrestricted Cash Withdrawal- There is no cash withdrawal restriction in Loan against Securities. One can withdraw as much cash as they need up to the loan limit. You can withdraw the entire loan amount in cash. However, credit cards have a cash withdrawal restriction due to which even at the time of emergency one cannot withdraw cash.

Flexible Repayment- Loan against securities offers the option of flexible repayment as only the interest component has to be paid and, the principal component has flexible repayment option. It can be repaid at any time within the tenor of the loan amount.

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Factors to consider of Loan Against Security

Portfolio Assesment- The bedrock of LAS is pledging securities for capital from a financial institution. It is important to ensure the financial viability of the securities from a future perspective and the health of the portfolio that you hold. A portfolio with a mix of securities and a portfolio with only a single type of security would offer different benefits to the customer. Assess and evaluate your requirements with your lender and then decide.

Documentation- Even though a loan against security requires you to submit minimal documents, these documents are often critical like KYC documents, income and employment proofs, security-related documents, Demat and overdraft account-related documents, etc. Without providing valid documents to the lender, your loan cannot be processed. Also, loan rejections could affect your credit records negatively. Keep your application form along with all the documents in check before you approach a lender to avoid any 11th-hour hassles.

Interest Rates- On a general record, loans against securities are offered at attractive interest rates (due to their secured nature), levied not on the entire loan amount, but on the amount being withdrawn from/remaining in the overdraft account. These rates depend upon the market rate of the securities. Your role here is to hunt for the most suitable rate for your loan to keep your financial burden in check.

Loan Amount and Tenure-The loan amount and tenure are indifferent to most institutions, but they do account for your requirements and change slightly for each borrower. To make the best of your LAS, ensure that you evaluate your options and discuss with your financial adviser of the loan amount and the tenure-based upon your repayment plan, etc.

Charges or Fees-  LAS comes with the advantage of lower fees and charges. However, they vary for each financial institution. However, some institutions may charge you with a pre-payment fee for returning the loan amount before the loan period matures if you use sources other than personal funds to repay the same. It is important to evaluate the terms and conditions of fees or charges and also compare the rates to ensure you go for the most competitive lender.

Holistic and thorough research is the key to avail a hassle-free loan against securities in India.


For an investor, a Loan Against Securities (LAS) offers a flexible liquidity option by pledging securities to avail capital. These securities can be in the form of mutual funds, equity shares, bonds, bank deposits, etc. This loan is often provided as an overdraft facility and you continue to retain your investment portfolio and the benefits that come with it.


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