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Loan against security is an overdraft facility that you get in return for pledging securities, such as mutual funds, bonds, shares and life insurance policies. It provides the benefits of a current account while letting you pay interest only on the amount used. Shares/ bonds/ mutual funds and life insurance policies is basically a loan wherein you pledge the securities you have interested in as collateral against the loan amount. Loan against security can be given against the following securities :
Insurance policies
Non-convertible debentures
NABARD Bonds
UTI Bonds
Mutual funds units
Demat shares
National Savings Certification or KVP, these are accepted in demat from only
1 .Widest range of collateral accepted in the industry
2. Scan based account opening
3. Overdraft facility available
4. Combines the power of loan and bank account
5. Anytime, anywhere access
6. Auto renewal of loan facility
7. No prepayment penalty (most of the cases)
8. The loan depends on the security the borrower is offering
9. The rate of interest usually ranges from 12% to 15%. The rate varies from bank to bank.
Loan Against Securities Purposes
An Individual, Proprietor/LLP, Private or Public Limited Company and a Private Trust can attain a loan against their securities for the following purposes:
1. Working capital requirement for business: Loan against securities can be taken to fund the day to day working capital requirement of the business to lead it towards a path of profit and future growth.
2. Business expansion: You can take a loan against your securities to expand your business. The loan amount can help you to create a new product or open new branches or offices in different cities.
3. Investment in capital market: If you want to increase your wealth and you are confident about your stock picks, you can take a loan on your present investments to raise money for further investment in the capital market. It can help you to build your wealth over time, and you can repay the loan by the profits you make from your future investments.
4. Any other personal use: Loan against securities can be taken for expenses like child’s marriage, education, buying a home or for any medical emergency.
To apply for a loan against securities you have to pay fees and charges applied by the Bank. The following charges are taken from loan against securities i.e processing fee, prepayment / foreclosure charges etc.
|
TYPE |
CHARGES |
|
Processing fee |
2% of the loan amount |
|
Prepayment charges |
NIL |
|
Foreclosure charges |
NIL |
|
Loan Amount |
Rs.1 lakh to Rs.20 lakh |
|
Tenure period |
1 Year to 3 Years |
Before applying for a loan against securities, you should fulfil all basic eligibility criteria as prescribed by the bank. You will get your loan amount very soon if you meet all the required eligibility criteria once the documentation is done.
1. Must be an Indian Resident
2. Should be at least 21 years of age
3. You should either be a salaried or self employed individuals
4. The security against which you are availing the loan should be approved by the bank
Any applicant who is going to avail for a loan against securities must have to submit the following documents. These documents are the requirements for the lenders who are providing you the amount of loan.
1. KYC
2. Latest statement of holding for mutual funds
3. Pledge form for the creation of pledge
4. Income proof = Latest salary slip showing all deductions or FORM 16 along with recent salary certificate
5. Last 2 years ITR
6. Last 6 month Bank Statement
7. Optional - Guarantor form (Mandatory in case of joint holdings)
Loan against property helps you to avail timely finance instead of selling off the securities in a haste. The limit of the financial assistance depends on the security that you have pledged. Usually a current account is opened in the borrower’s name and the rate of interest is calculated on the amount that is withdrawn by you during the period of utilisation.
When you pledge a security, you get steady cash easily at the time you need it the most and this also means that you won’t have to sell your shares and not benefit from the bonus and dividends.
Loan against securities things to consider before applying
Check the eligibility criteria
Choose a bank which accepts varied investments as security
Choose a bank which offers high amount sanction on low interest
Repayment tenure
Broadly, there are two types of loans under this category:
1. Loan Against Shares
2. Loan Against Bonds
3. Loan Against Mutual Funds
4. Loan Against Insurance Policies
5. Loan against ESOP financing
6. Loan against IPO financing
7. Loan against FMPs
|
BANKS |
INTEREST RATE |
|
10.50% to 12.75% |
|
|
9.25% to 13% |
|
|
8.20% to 12.50% |
|
|
9.50% to 12% |
There are two ways to apply for loan against securities :
1. Online Method
Today, almost every bank in India provides you with the option of availing loan against securities online. The whole process is fast and hassle-free. You can visit the official website of the bank from whom you wish to avail the loan and click on the ‘Apply Now’ button. You will have to enter the details required by the lender and upload the necessary documents. Once the bank has verified the details and documents submitted by you, the loan amount will be disbursed to your bank account.
2. Offline Method
You can visit the nearest branch of the lender from whom you wish to avail the loan along with the necessary documents. An official from the bank will then further assist you with the process of applying for a loan against securities scheme.
The mathematical formula to calculate EMI is :
EMI = P × r × (1 + r)n/((1 + r)n - 1)
Where,
P= Loan amount,
r= interest rate,
n=tenure in number of months
Bank offered Financials products
Loan against security is an overdraft facility that you get in return for pledging securities, such as mutual funds, bonds, shares and life insurance policies. It provides the benefits of a current account while letting you pay interest only on the amount used.
You can repay the loan at any point of time during the loan tenor by repaying the due interest and principal loan amount through RTGS/ NEFT/ cheque.
2% of the loan amount processing fee is charged in loans against securities.
The mathematical formula to calculate EMI is :
EMI = P × r × (1 + r)n/((1 + r)n - 1)
Where,
P= Loan amount,
r= interest rate,
n=tenure in number of months
You can download an application form from the website and you will also visit the nearest bank branch with the form or related documents.
The purpose of Loan Against Securities is to take care of all your investment as well as personal needs, and to help you meet your contingencies.
The minimum amount is Rs.1 lakh and maximum loan amount is Rs.20 lakh for loan against securities.
You can pledge your own securities, or those of your blood relative (parents, spouse, children and siblings only) above 18 years of age. If you are pledging securities that belong to anyone other than yourself, the security holder must be a signatory to the overdraft agreement as a Co-Applicant.
All our loans come with the Part-Prepayment facility. With this, you can part prepay as much as you want during the tenor of loan
Last Updated on : 22/Oct/2020Know More About
You're eligible for a Loans Against Securities if you:
Are legally adult enough to handle it
Have still got it
Get a regular pay check
Make more than a basic buck
Your eligibility depends on:
Earn more than minimum income required
Maximum allowed Loans Against Securities is Rs. 10K to Rs. 45 lakhs
EMIs of other loans loweryour eligibility
Boost your eligibility by:
Pay off your credit card bills
Choose longer tenure loan up to 5 years
Nothing gets done without that paperwork (which we'll happily carry over to the bank for you, no sweat). Here's what you'll need:
- 1. Photo ID and age proof
- 2. Signed application form with photograph
- 3. Residence proof
- 4. Last 6 months bank statement
- 5. Documentation for salaried applicants:
- Last 3 months salary - slips
- Form 16 or Income Tax Returns
- 6. Documentation for self-employed applicants:
- Last 3 years Income Tax Returns with computation of Income
- Last 3 years CA Certified / Audited Balance Sheet and Profit & Loss Account
Updated on 25 Nov 2017
| Loans Against Securities Details | |
|---|---|
| Interest Rate (Monthly reducing balance) | 10.5% - 12.75% |
| Processing Fees | Varies with bank |
| Loan Tenure | year to years |
| Pre-closure Charges | Varies with bank |
| Guarantor Requirement | Varies with bank |
Loans Against Securities EMI Calculator