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How to Apply for a Loan Against Your Shares

A Loan Against Shares (LAS) is a financial product offered by banks and financial institutions that allows individuals to borrow money by pledging their securities, such as stocks, mutual funds, or bonds, as collateral. In simple terms, it is a loan that is secured against your investment portfolio. This type of loan is also known as securities-backed lending or share pledge loan.

How Do Loans Against Shares Work?

Before you apply for a loan against stock, there are a few key aspects you should note. They are as follows:

Aspect Information
Loan Amount
Based on the value of pledged securities. Usually, up to 50-70% of the total value of securities.
Eligible Securities
Only listed stocks on recognized exchanges and certain mutual funds are accepted as collateral.
Loan Tenure
Loan tenure varies, usually from months to years, based on lender terms.
Interest Rates
Interest rates are lower than unsecured loans but higher than regular home/car loans due to higher risks.
Margin Calls
Lenders may request more collateral (margin calls) if security value drops significantly, preventing forced sale of assets.
Loan-to-Value (LTV) Ratio
LTV ratio shows % of security's value lent. Varies by security type. E.g., Rs. 5 lakhs loan on Rs. 10 lakhs shares = 50% LTV.
Loan Repayment
Repay via monthly EMIs or interest-only payments with principal at the end of loan tenure.

How to Get a Loan Against Shares?

Follow these steps to get a loan against your equity shares:

Step 1: Approach a Bank or Financial Institution

Start by reaching out to banks or financial institutions that offer loans against shares.

Here are some of the most popular banks and institutions offering loans against shares in India:

Bank/Institution Total Loan Value Against Security
Up to 92%
85%
80%
Up to 50%
SBI
50%

Step 2: Provide Necessary Documents

You’ll need to submit documents such as KYC (Know Your Customer) documents, income proof, proof of ownership of the securities, and other required paperwork.

Step 3: Valuation of Securities

The lender will assess the value of the pledged securities and determine the loan amount you are eligible for.

Step 4: Agreement and Pledge

After the loan amount and terms are agreed upon, you’ll need to sign the loan agreement and pledge the securities to the lender.

Step 5: Disbursement of Funds

Once the paperwork is completed, the lender will disburse the loan amount to your designated account.

Conclusion

A loan against shares is a viable financial solution for individuals seeking liquidity without selling their investments. By pledging securities like stocks or mutual funds as collateral, borrowers can access funds at lower interest rates compared to unsecured loans. However, loans against shares come with risks, such as potential margin calls and the need to closely monitor market fluctuations. It is essential that you thoroughly understand the terms, risks, and implications before availing of this facility.

Frequently Asked Questions

Eligible securities for a loan against shares typically include listed stocks on recognized stock exchanges and select mutual funds. Usually, the lender will have a list of approved securities for pledging.

If the value of the pledged securities drops significantly, the lender may issue a margin call, requiring you to provide additional collateral or repay a portion of the loan to maintain the required Loan-To-Value (LTV) ratio.

Yes, in most cases, you continue to be the beneficial owner of the pledged securities and are entitled to receive dividends or interest declared by the companies or funds.

You will get back your shares in a loan against shares when you repay the loan in full, including all interest and fees. The exact timing of when you will get your shares back will depend on the terms of your loan agreement.

Amit Arora Finnable

AMIT ARORA

I am a seasoned retail banker with over 21 years of global experience across business, risk and digital. In my last assignment as Global Head Digital Capabilities, I drove the largest change initiative in the bank to deliver the end-to-end digital program with over US$1 billion in planned investment. Prior to that, as COO for Group Retail Products & Digital, I implemented a risk management framework for retail banking across the group.
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Frequently Asked Questions (FAQs):

Finnable has set a required minimum age for personal loan of 21 years for individuals to be eligible for a personal loan. This ensures that applicants have reached legal adulthood and are capable of entering into a financial agreement.

Yes, Finnable understands the financial needs of young borrowers and offers personalised loan options tailored to their specific requirements. Whether it's financing higher education, purchasing essential items, or starting a business venture, Finnable provides support to young individuals seeking financial assistance.

Borrowers nearing retirement may have unique financial needs, such as retirement planning, medical expenses, or supporting their children's education. Finnable offers personalised loan solutions that consider the specific circumstances of pre-retirement individuals, helping them meet their financial goals.

Unfortunately, no. Finnable does not, at the moment, offer any loans to senior citizens. Currently, 60 is the maximum age for personal loans set by Finnable

Other than personal loan age limits, Finnable considers various other factors for determining loan eligibility. These factors may include the applicant's income, credit score, repayment capacity, and employment stability. By assessing these aspects comprehensively, Finnable ensures that borrowers across different age groups can access the loan products that best suit their financial needs. 

 

Amit Arora

I am a seasoned retail banker with over 21 years of global experience across business, risk and digital. In my last assignment as Global Head Digital Capabilities, I drove the largest change initiative in the bank to deliver the end-to-end digital program with over US$1 billion in planned investment. Prior to that, as COO for Group Retail Products & Digital, I implemented a risk management framework for retail banking across the group.
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