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attractive interest rates (due to their secured nature), levied not on the entire loan amount, but on the amount being withdrawn from/remaining in the overdraft account.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.