Articles

6 Questions to Ask Before Applying for a Loan Against Securities

by Arwind Sharma Finance Advisor

When you add shares to your investment portfolio, it is likely that you do so because of the high returns that they offer. Since you can buy and sell them with ease too, they are said to have high liquidity. But, the truth is that you can enjoy the same liquidity without selling your securities. This is because you can take a loan against them instead.


A loan against securities considers your securities as collateral, and provides you with funds in exchange. So, you can raise finances without losing ownership of your securities. Additionally, your securities earn dividends even when they are, with a lender as collateral. This enhances your financial benefit.  


However, before you apply for a loan against securities, ensure that you are armed with the right information. Here’s a look at some questions that you should have answers to, before submitting your application.  


What Securities can I Take a Loan Against?


Financial institutions have a list of approved securities, against which they offer you a loan. Broadly, you can avail two types of loans under this category: loan against shares, which is a term loan against approved shares within the retail and HNI category, and loan against mutual funds and fixed maturity plans. The latter is a term loan that you can avail against approved mutual funds and fixed maturity plans such as bonds.




What is the Minimum and Maximum Amount that I can Avail?


Your portfolio’s value determines the total value of the loan that you can avail. Lenders generally allow you to access a loan amount that corresponds to 50% of the value of your shares. However, taking a Loan Against Securities from Bajaj Finserv allows you to avail a minimum sanction of Rs. 15 lakh and a maximum amount of Rs. 10 crore with respect to your investment portfolio.


How Flexible is a Loan Against Securities?


While this loan is affordable, its flexibility depends on the lender that you choose. For example, when you take a Loan Against Securities from Bajaj Finserv, you can also get flexibility in terms of how you can use the funds. Make use of the Flexi Loan facility to withdraw from the total loan sanction as per your needs.


Here, you pay interest, only on what you withdraw. Also, to make repayment flexible, you can choose to pay interest-only EMIs and pay the principal at the end of the loan tenor.


What are the Eligibility Criteria that I Need to Meet to Apply for this Loan?


The eligibility criteria Loan against securities set by most financial institutions are basic. For starters, the amount of the securities that you hold should be at least Rs. 25 lakh. Apart from that, you must be a resident citizen of India and must be at least 25 years of age. Additionally, you can be salaried or self-employed, but having a regular income is crucial.




What is the Repayment Tenor that I can Avail of when I Take this Loan?


Perfect for short-term finance needs, this loan has a tenor of 12 months. You can repay what you borrow over this tenor and make part prepayments or foreclose the loan at no additional cost. This allows you to clear the loan quicker and reclaim your securities.


How can I Apply for this Loan?


Apply online by comparing lenders and choosing the best one. When you apply online, you stand to benefit from instant approval. Fill in the form and submit the necessary documents. Then, simply await approval and disbursal. To apply offline, you can start by sending an SMS or giving a missed call to the lender. A representative will get back to you and guide you on the next steps.


So, the next time you need access to funds to finance immediate needs, don’t neglect a loan against securities. It is an easy way to use your investment to raise finance without giving up ownership rights.



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About Arwind Sharma Advanced   Finance Advisor

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Joined APSense since, October 9th, 2015, From Pune, India.

Created on Apr 2nd 2018 04:28. Viewed 586 times.

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