In this episode of Dhan ki Baat, Nishant Jasapara, Chartered Accountant and a Company Secretary, explains about Loan Against Securities.
Ever needed quick funds to take care of an urgent business or personal financial crunch? Loan against securities is a new and innovative method to assist you in fulfilling such a requirement.By way of loan against securities, you can borrow capital by pledging your financial investments. While conventional borrowing is related to securities such as gold, property or vehicle, or insurance policies, it is also possible to use your shares and mutual fund investments to obtain a loan.
Taking a loan against your securities provides instant liquidity against your shares, mutual funds debentures or any other investments without actually selling them off.
Both banks and NBFCs disburse loans against securities. To ease your decision-making process,here is a comparison that can help you to determine your preferred creditor.
|Margin Requirement||50% against equity/equity oriented mutual funds & lender’s discretion on debt/ debt based mutual funds||50% against equity/equity oriented mutual funds & lender’s discretion on debt/ debt based mutual funds|
|Maximum Cap on Loan Amount||Ten lakh against physical shares 20 lakh against demat shares||No cap on the amount of loan|
|Loan Processing||Slow and Time-Consuming||Easy and Fast|
Taking a loan from a Non-Banking Financial Company is the safest, fastest and most effective way to find funding for your cause. Without having any cap on the loan amount, you can take a loan of any amount depending on your investments.
You are eligible to take a loan against your securities if you are :
Purposes of taking a loan against securities?
An Individual, Proprietor/LLP, Private or Public Limited Company and a Private Trust can attain a loan against their securities for the following purposes:
You can choose a product between:
The credit provider company reviews your loan application for creditworthiness before providing you with the loan. There are some common parameters
Loan against securities is all about investments that are good enough to be held as collateral. The features of a good security are:
The process is pretty straightforward and doesn’t require complicated documents:
The process of attaining loan against securities from IIFL is given below:
When you take a loan from IIFL, you are provided with the following facilities:
Loan against securities taken from IIFL is a simple and quick process, with instant loan approval and many other facilities. If you have any other query regarding loans and how you can take one, feel free to call IIFL. We are always happy to help.
Mr. Nishant is a Chartered Accountant and a Company Secretary with 15+ yrs of experience in the Retail lending space and has handled multiple product suites across Business Development, Sales, Product and Credit. Prior to joining IIFL, he has also worked with Tata Capital, ICICI Bank & Time of Money Ltd where he has handled multiple roles and responsibilities for Business Loans, Loan Against Securities and Consumer Durable Loans at different points in time.
Unlike traditional loans where gold, property or car was given as collateral to obtain a loan, you can now take a loan by pledging your financial investments in the stock markets (shares, Mutual funds, bonds etc.) as collateral. This new and innovative credit service is known as ‘Loan against securities’.
If the loan is taken from an NBFC, there is no upper ceiling on the amount of the loan. However, if you opt to avail this service through a bank, you can only take a loan of Rs10 lakh against physical shares and Rs20 lakh against dematerialized shares.
An individual, a proprietory concern, Limited Liability Partnership, Private or a Public Limited Company and a Private trust are all eligible to take a loan against their securities held in the Indian financial market.
A loan against securities is usually taken to meet the needs of urgent funds for the working capital requirement of your business, for expanding business, for raising money to invest in the capital market or for personal use like child’s marriage, higher education or medical emergencies.
Fixed term loans against shares, mutual funds, bonds, etc. are available. They have a tenure of 6-12 months and interest rate of 11% or higher. Overdraft facility is also available. It usually has a tenure of 12-24 months and rate of interest of 11% onwards.
The Credit Underwriting process reviews:
Securities are tagged as ‘good’ if they are:
You will need the following documents to get a loan from IIFL:
If you take a loan from IIFL, you are not required to pledge any additional collateral apart from your financial securities.
Upon reviewing the securities, we provide the loan estimate in less than 2 hours. The approval decision on the loan is taken within 24 hours and upon approval, the amount is transferred to your account within 48 hours.
You are eligible to get up to 50% of the current market value of your security for pledging equity/equity-oriented mutual funds. However, the margin on debt/debt based mutual funds is at the lender’s discretion.