Loan against securities (LAS) is a financial product that enables individuals to obtain a loan by using their investments as collateral. Investors can pledge shares, bonds, or even mutual funds instead of having to sell them when they need cash quickly and conveniently. It allows them to retain ownership and the potential returns on their investments.
What is a Loan Against Securities?
One kind of secured loan that banks and other financial institutions offer is a loan against securities, in which you pledge your financial assets in exchange for the loan. This is a short-term solution because the lender will provide you with money according to the market value of the securities you pledge; therefore, it is quite flexible.
Types of Securities You Can Pledge
- Bonds: Can also be pledged bonds of corporations and the government.
- Insurance Policies: Some life insurance policies that have cash surrender values very well may qualify.
- Shares: Stocks of publicly traded companies are often available as loan collateral.
- Mutual Funds: It is a well-liked option for mutual fund investors because it accepts specific mutual fund units.
Features
- High Loan to Value: Get a loan amount starting from Rs. 50,000 to 80% of the value of the securities pledged.
- Easy Repayment: Credit your account each month in the form of your interest payments. Interest is charged only on the portion of the loan you use.
- Digital loan against Shares/ Mutual Funds: Get a quick loan in three simple steps by digitally pledging your shares or mutual funds. It is entirely paperless and automated.
- Loan End Use: Only personal use is permitted for the HDFC Bank Loan Against Securities. Speculative activities, capital market-related activities, and anti-social activities are prohibited uses of the loan amount. All credit is given at HDFC Bank’s sole discretion.
- Transparent Processing: When the loan is being processed, all of our fees are disclosed up front. The HDFC Bank Loan Against Securities relieves you of the burden of handling past-due checks and has no prepayment or foreclosure fees.
- Quick and Efficient Servicing: Our doorstep service and effective servicing procedures will expedite the processing of your loan. We have a dedicated help desk for Loan Against Securities to assist you throughout the entire process.
Documents
- Identity proof
- Address proof
- Signature proof
Eligibility
- Residents who work for themselves or are paid (for funding against equity & debt)
- Non-resident individuals (NRIs) must be at least eighteen years old to receive funding against equity and debt mutual funds held in the borrower’s name.
Conclusion
A loan secured by securities provides a convenient and adaptable way to obtain funds without having to sell investments. Borrowers can retain ownership and potential returns by pledging assets like stocks, bonds, or mutual funds. This option is ideal for meeting short-term financial needs due to its clear terms, simple digital processes, and high loan-to-value ratios.
FAQ’S
Q1. What is the highest amount that can be borrowed against securities?
Ans. Depending on the market value of the security, the minimum and maximum limits are Rs 50,000 and Rs 20 lakh, respectively.
Q2. What does it mean to borrow money against securities?
Ans. A securities-based line of credit helps you to meet liquidity needs by tapping into the value of your investments without having to sell them. This type of borrowing could be easier to arrange and more flexible than other choices. That will depend on whether you have enough eligible to be used as collateral.
Q3. Is it possible to borrow money against stocks?
Ans. A loan against shares (LAS), which provides a low-cost borrowing option with interest rates ranging from 9 to 12%, might be a more strategic choice than selling investments to raise money. Leveraging shares does, however, come with risks and conditions that should be carefully considered.