What are Loan Against Securities? What documents and eligibility criteria are needed to apply for a loan against shares?


Loan Against Securities
Loan Against Securities
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Last updated on July 29th, 2022 at 11:26 am

There are circumstances of exigency that may require certain finances to be put up or you might be facing a cash crunch to meet any urgent short-term or long-term goals. Even though loans have become approachable, they carry a high-interest rate, and sometimes stringent terms which make availing of personal loans a constraint. 

Sometimes you may have to put your prized possessions as collateral thus making them a risky option to choose. If you are in urgent need of funds and you want to take out a loan but you do not want to trap your physical possessions, a smart alternative would be to take up a loan against the securities/shares.  

When it comes to car loans, one has to contemplate car loan interest rates that will fit their financial repayment capability.

How does a loan against shares/securities work?

A loan against securities allows you to avail of a loan by pledging your financial securities as collateral. A loan against shares, will not only help you monetize your investments but you would not need to sell them off to raise the funds. A loan against shares does not require any collateral or additional securities other than the one in your Demat account.  

Here are some compelling arguments why you may find it a better option to avail loan against securities than to take up a personal loan. 

High-Value Loans 

You can easily pledge your shares, bonds, IPOs, ESOPs, etc as collateral for upto Rs 10 crores of your fund needs. The loans provide a virtual restriction-free use and are also easy to qualify for.  

Quick process 

Loans follow a quick process. So basically if any medical emergency comes up and you need instant funds, instead of selling your securities you can simply pledge them and the funds will be disbursed to you within 24 to 48 hours, thus allowing you to meet your urgent deadlines. 

Better ROI on your investments

You would have built a portfolio with a diverse mix of securities and managed it with portfolio management skills, which if you do not liquidate, can give you higher returns with time. So instead of liquidating them, you can simply pledge them, raise funds and your securities keep earning you returns and dividends too.

You borrow against variety of securities

No matter how diversified your portfolio is, you can still pledge almost any dematerialised security. Rurash allows you to borrow against 800+ approved securities. 

Flexible Repayment terms 

Pledging your securities for loan, allows you to pay back in flexible payments. It also allows prepayment and foreclosure without any extra charge. You can easily choose between tenures of a maximum of 36 months

Eligibility criteria for loan against securities

Nationality 

Only Indian residents are eligible to apply for loan against shares at banks or NBFCs 

Age Criteria 

The individual should be of minimum 18 years of age or with some institutions 21 years of age

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Documents needed

The individual will have to submit their ID proof, address proof and also document proof of securities along with their passport size photograph.

Minimum Security Value 

The Individual should be salaried or self-employed and should have a minimum security value of Rs 4 Lakh 

Documents needed 

For Salaried documents needed to be submitted are 

  1. PAN Card
  2. Identity and address proof 
  3. Passport size photograph 
  4. Bank statement of last 6 months 
  5. Cancelled cheque 
  6. Demat account statement 
  7. Income proof 

Those who are self-employed have to submit the following documents 

  1. PAN Card
  2. Identity and address proof 
  3. Passport size photograph 
  4. Bank statement of last 6 months 
  5. Canceled cheque 
  6. Demat account statement 
  7. Income proof 
  8. Profit Loss account statement 
  9. Balance Sheet 
  10. Office address and existence of Business Proof

Things to keep in mind while taking loan against shares/securities

  • You should choose a bank or financial institution that accepts various securities such as Mutual Fund Units, IPOs, insurance policies or even retail shares etc. 
  • Your selected bank should charge the lowest for the highest sanctioned limit. It is always a good idea to research well comparatively 
  • The lender should allow a flexible payment schedule. The general tenure is between 1 to 3 years. However, the tenure may still depend on the loan amount.
  • Even if the general tenure stays as 1 year, it can easily be renewed. 
  • The rate of interest varies around  12-15% from lender to lender. 
  • The loan amount depends on the security being offered.
  • Prepayment of loan has no extra charge

Final Word

By taking up a loan against securities, you can also avail of the borrowing potential of the stock market investments. The critical point here being that you have to find the right financial institution that helps you take a loan against shares

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RURASH is one of India’s investment management firms, providing financial solutions to augment the client’s wealth and facilitate building a legacy. For any guidance regarding financial instruments, Connect with the relationship manager now or write to: [email protected]


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