Availing Loan Against Securities Is as Easy Ordering Food Online
We are in the “Instant Era” where nothing seems to wait. While bringing a cab or food to your doorstep was just a dream a few years ago. The same applies to loans as well. Now the financing is done in a jiffy with online processes and applications. A loan against security is a quick loan option if you have a lot of investments in hand.
What Is A Loan Against Security?
A loan against security is a secured loan offered against investments. You can pledge your shares, debentures, mutual funds, insurance policies, etc to get a loan against security. Normally 75% to 85% of the value of the investment is provided as a loan. This is called the loan-to-value ratio. The lender provides a loan against security as an overdraft facility. The interest is charged only on the used amount from the given limit. You can repay the used limit as EMI and also in lump sum as per your convenience. There are no foreclosure and prepayment charges for a loan against security.
Procedure To Get a Loan Against Security
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Online
Choose the lender you wish to apply for a loan against security.
You can visit the official website of the lender and apply online.
Provide basic details like Name, Age, Address, Mobile Number, Details of security, etc.
Submit the application form. The lender’s authorised representative will keep in touch with you for further processing.
Mobile app
Some lenders offer quick and same-day approval through mobile applications. Keep your investment details ready to get a loan against security.
Offline
You can visit the lender’s branch physically and submit the loan application form with the necessary supporting documents. The loan will be approved on satisfactory perusal of the application and documents.
Some lenders offer doorstep banking services where the loan processing is done in the comfort of your home. You can avail of the service to get a loan against security instantly.
Features Of Loan Against Security
Minimal documentation and online processing.
Comprehensive and wide list of securities accepted.
Dedicated customer service.
Shorter repayment period.
The loan amount is based on the security the borrower is providing.
There are no prepayment charges for the loan.
The borrower should be in the age group of 18 to 65 years for a loan against security.
Benefits Of Loan Against Security
No prepayment charges for foreclosure.
High value of loan amount.
Low-interest rates.
Pledging the investments instead of selling.
Lenders Offering Loans Against Security
ICICI Bank
Axis Bank
State Bank of India
HDFC Bank
Bank of India
Yes Bank
Bajaj finance and much more.
Amount Of Loan Against Security
A minimum of Rs 1 lakh and the maximum depends upon the value of your portfolio.
Interest Rate On Loan Against Security
Starting from 9.5% to 15% per annum.
Charges On Loan Against Security
Processing charges =0.50% to 2.50% of the loan amount
Penal interest = 1% to 3.5% of the overdue amount
Document processing fees = Rs 750 to Rs 2,000
Foreclosure charges = No foreclosure charges.
Prepayment charges = No prepayment charges.
Eligibility To Get Loan Against Security
Indian nationals above 18 years of age.
Regular source of income.
The minimum security value of Rs 2 lakhs varies according to the loan required.
Requirements For Underlying Security
Stable market value without unusual fluctuations.
Easily transferable security.
Easily marketable.
Documentation Required To Get Loan Against Security
Proof of Identity = Aadhar card, Driving license, Passport, Voter ID
Proof of Address =Aadhar card, Utility bills, Passport
Proof of Business =Certificate of registration or constitution Latest utility bills
Proof of Income =Latest pay slips, Latest income tax returns Last 6 months’ bank statements
Proof of Securities= Demat statement, Holding statement ,Broker’s statement
Loan Against Security - Things To Consider
Go for lenders who offer a wide bucket of investments for loans against security.
Choose the lender who offers the maximum percentage of security value as a loan.
If you do not wish to pledge your entire investment, you can pledge investments that have higher yields. This can fetch you the maximum loan amount at low-interest rates.
Sometimes selling a share can bring the loan amount that you are applying for. Compare, analyze, and decide on selling or pledging your investment.
Choose a flexible repayment tenure between 1 and 3 years.
Your portfolio will be reviewed daily.
Choose insurance policies of longer tenure for loans against securities. You may consider pledging the insurance policies of your son or daughter instead of yours.
Your bank fixed deposits can help in getting a higher amount of loan than pledging shares.
Your income or credit score is least considered since the borrowing is secured.
There is no change in the portfolio you have invested even after pledging a loan against security.
You continue to receive the income and gains from the investments.
Still, your repayment habit of loan against security counts for calculating your credit score.
Your credit mix can become decent with a secured loan like a loan against security.
If your pledged portfolio is performing well you cannot sell them unless you have repaid the loan amount.
In case the portfolio value decreases, the lender may decrease the overdraft limits.
A loan against security can be availed for meeting any emergency and is not a good option for long-term purposes.
A loan against security is great short-term finance to satisfy urgent financial requirements. The interest rate is also lesser compared to other short-term loans. The documentation is the bare minimum and you can get your loan processed within 24 hours. You can use your investments lying idle to generate a funding source. Loans against securities are ideal for all the investment geeks looking for short term funding.
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