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With loan against securities, one can get an overdraft against their securities like Shares, LIC insurance Policies, mutual funds, NSC etc

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Loan Against Securities

Loan Against Securities Meaning
Banks and financial institutions keep coming with various ways to fulfill the monetary requirements of each and every individual as per their credit worthiness and paying capacity. One step in this direction was the introduction of gold loan. Another one has been Loan against Securities, popularly referred to as LAS. Under “Loan against Securities”, loan is advanced to a customer against pledge of securities or simply put loan against insurance policy, mutual funds, NSC and other securities. The list of approved securities against which LAS can be advanced varies from bank to bank, but primarily the following are considered to be approved securities against which LAS could be given.
 
1.      Non-Convertible Debentures
2.      Mutual Fund Units
3.      NABARD Bonds
4.      Demat Shares
5.      UTI Bonds
6.      NSC/KVP (Accepted only in Demat form)
7.      Insurance Policies
 
LAS helps you to get loan against the securities that you have, for the time being, merely pledged without selling them off in haste. An overdraft facility is advanced to you by bank or financial institution when you pledge your securities. The value of the overdraft limit that is advanced to you is determined on the basis of the securities that are pledged by you.
 
For smooth transactions, a current account is opened in your name and it is at your discretion how and when to withdraw and use the money. The rate of interest is calculated only on the amount withdrawn by you and only for the period of utilization.
 
The advantageous part of pledging your securities is one that you are able to get steady cash easily at the time you need it most and secondly you would not be devoid of the benefits as a shareholder. This means that you can enjoy your rights of receiving dividends and bonuses along with gaining from the price movements in the shares for which you have availed the loan from the bank.
 
In order to meet your short-term financial needs, Loan against Securities offers a good choice as you do not have to sell your stocks in haste. Moreover, the interest rate at which you get LAS is lesser as compared to a personal loan.
 
Features of Loan Against Securities 
  1. Secured Loan - Loan against securities is a secured loan as your bonds, shares, debentures or mutual funds are kept as collateral security when this loan is advanced to you. 
  1. Tenure - The tenure of loan against securities is generally one year. You may also get it renewed as per your requirement. 
  1. Rate of Interest - Generally interest rates at which loan against securities is advanced varies from 12% - 15% p.a but that may also vary from bank to bank. 
  1. Processing Fees - Banks and financial institutions usually charge approximately 2 % as processing fees. 
  1. Loan Amount - The loan amount for which you may be eligible depends upon the type of security that you are offering. For example, in case you are offering equity shares then the amount that you will be eligible for would be 50% of the value of such shares. 
  1. Prepayment Charges - At any point of time if you wish to prepay your loan against securities then you can do so without giving it a second thought as there are no prepayment charges attached to this loan. 
  1. Age – Any one who falls within 18years - 65years of age can apply for availing loan against securities. 
Documents Required for Loan against Securities – Generally, following documents are required by banks and financial institutions before they advance you loan against securities but the required documents may vary from bank to bank.
 
A. For Salaried Person
  1. Pan Card
  2. Identity Proof
  3. Photograph
  4. Address Proof
  5. Bank Statements (Latest 6 Months)
  6. Cancelled Cheque
  7. Demat Account Statement (Securities need to be in electronic form)
  8. Income Proof
B. For Self-Employed Person
  1. Pan Card
  2. Identity Proof
  3. Photograph
  4. Address Proof
  5. Bank Statements (Latest 6 Months)
  6. Cancelled Cheque
  7. Demat Account Statement (Securities need to be in electronic form)
  8. Income Proof along with Profit and Loss Account, Balance Sheet etc.
  9. Office Address Proof
  10. Business Existence Proof
List of Popular Banks Offering Loan Against Securities
  1. ICICI Bank Ltd
  2. Axis Bank Ltd
  3. HDFC Bank Ltd
  4. ING Vysya Bank
  5. IDBI Bank Ltd
  6. Standard Chartered Bank India


  • Nepal Das:
    How to apply loan?
    17-Jun-2016 03:59 PM
  • Nitin Bagda:
    I have Axis Bank Hybrid Fund series -7 . 60000 Units Can I get Loan or overdraft facility on it.
    18-Apr-2016 04:14 PM