Loan Against Securities

Loan against securities are secured loans and the rate of interest in many cases is lower than that on personal loan rates. These loans can be availed with minimal documentation. The details of loan against securities are listed as follows:

Loan against securities	Details
Interest rate	9.5% to 12%
Eligible securities	Insurance policy, Shares, PPF, Mutual Funds, Bonds, NSCs
Tenure	Up to 1 year with the option to renew
LTV ratio	Up to 85%
Eligibility	Individuals and Hindu Undivided Families (HUFs)
Prepayment charges	Nil in general
Processing fee	Starting from 0.15% of the loan amount

Loan against Shares are loans granted against the security of listed stock exchange shares and are a popular form of availing short or long term loans. Some of the key features of Loan against Shares are:

• The loan amount of up to ₹ 20 Lakh can be availed. Some banks offer even higher loan amounts.
• Loan to Value Ratio can range up to 50-60% of the market value of the shares.
• Most of the banks do not charge pre-closure and part-payment penalty, which helps in easier repayment.
• Banks also offer an overdraft facility on Loan against Shares that can be renewed annually.

Loan against Mutual Fund units can be availed for meeting short term business or personal fund requirements. The loan can be availed form leading banks or NBFCs pledging your mutual fund units. A key feature of the scheme are:

• The loan amount as a percentage of the market value of mutual funds can range up to 60%.
• You can get a high loan amount of up to ₹ 20 Lakh or even higher.
• Typically, banks and NBFCs allow prepayment of these loans without charging any prepayment fees.

PPF Loan is a loan taken against the security of the balance in your PPF account to meet your urgent personal expenses.

• PPF Loan Interest Rate can be availed at low-interest rates.
• Loan on PPF account can only be taken between the third and sixth financial year of opening the PPF account.
• The tenure of a PPF loan is generally 36 months.
• A maximum of 25% of the PPF account balance at the end of the preceding year prior to the loan application year can be availed as a loan.

Identify the security to be pledged: A comprehensive list of securities is provided by banks against which they offer a loan. The loan amount is a percentage of the market value of the security, which depends on how volatile the market value of the asset is. For example, the loan amount availed against equity shares is around 50% of its value, whereas that of bank deposits is around 85%.

Apply to the bank for a loan: Once you identify the securities you want to pledge, you should apply to the bank. The bank will conduct an assessment of the securities to evaluate your eligibility and approve your loan. Once the bank approves your Loan against Securities, it will open a current account with an overdraft facility. The borrowing limit of the current account is based on the value of collateral, in this case, financial security like equity shares, debenture, bonds, mutual funds, etc.
Borrow within your credit limit as and when required: Based on the value of your collateralized security, a limit is set on withdrawal from the current account. After this, the account holder is free to withdraw at any time through ATM and internet banking. Repayment is made by depositing into the account, whenever the account holder has surplus funds. This process makes this loan very different, simpler and more flexible from the conventional EMI based loans.

Features of loan against securities are listed as follows:

• Multiple securities: Secured Loans took against the security of your financial investments such as share, mutual funds, insurance policies.
• Eligible Age: Available to individuals within the age group of 18-65 years.Loans against securities are generally offered only to Indian Residents and HUFs.
• Loan tenure: Loan tenure can be up to 1 year with an option to renew it annually.
• Overdraft facility: It can opt as an overdraft facility which allows the borrower to withdraw from the account within the credit limit and deposit any surplus amount as available.
• Interest rate: The loan against the Security interest rate is in the range of 9.5-12%.
• Processing fee: Processing fees are as low as 0.15% of the loan amount in some banks.
• Charges: Prepayment charges on Loan against shares are nil in most banks. However, few banks may charge some pre closure penalty. Overdraft account maintenance charges, stamp duty, etc may be charged on the current account transactions.
• Provided by top lenders: All top banks such as ICICI, HDFC Bank, Axis Bank, Standard Chartered and IDBI, etc offer loans against security.

✅What is a loan against security?

Loans against securities are secured loans that you get by pledging your securities with a bank or NBFC. These loans are easy loans that can be availed with minimal documentation and at a lower interest rates in comparison to a personal loan.

✅Can we get a loan against shares?

Yes, you can get a secured loan against the security of listed stock exchange shares. As per the loan against security, you can borrow a loan up to ₹ 20 Lakh in general, as per the LTV ratio of 50-60% of the LTV.

✅What is the rate of interest for loan against securities?

The interest rate for loan against securities ranges between 9.5-12%. The interest rates depend upon the nature of underlying security, loan amount and loan tenure.

✅Can I take out a loan on my LIC policy?

Yes, LIC endowment policy holders can take a loan against their LIC policy for Up to 90% of the surrender value. The loan against LIC loan can be used to meet unexpected personal expenses.