Loan Against Bonds in India

When you submit your government or corporate bonds as collateral to a bank to borrow a secured type of loan, it is called a loan against bonds. In such cases, you do not sell your bonds or lose ownership over them. You only use these bonds as security to meet your immediate financial needs. 

Benefits of applying for a Loan against Bonds

The below-listed are some of the benefits of applying for a loan against bonds: 

1. No Transfer of Ownership: When you apply for a loan against the bonds, you don’t lose ownership over the bonds. This means you will still be earning capital gains or the interest income (if applicable) and also meet your financial needs. 

1. Quick Processing: When you submit your bonds as collateral for a loan, the banks usually complete the formalities quickly and disburse the loan amount. Bonds can be liquidated easily, making them highly valued collateral. 

1. Lower Interest Rate: Opting for a loan against bonds is a secured form of loan. The secured loans generally have a lower rate of interest as compared to an unsecured loan. 

1. High Loan Amount: Based on the quality and value of loans you are pledging, you can get a loan of up to 70% of the bond’s market value. In some cases, it may be even higher. 

Eligibility Criteria to Apply for a Loan Against Bonds: 

The basic eligibility criteria to apply for a loan against bonds are as listed below: 

1. The applicant should be an Indian citizen. 

1. The applicant should be 18 years old or above. 

1. The applicant should pledge bonds in the demat form. 

Note: The eligibility criteria listed above are general and will vary depending on the lender. 

Documents required to apply for a Loan Against Bonds: 

The documents required to apply for a loan against bonds are as follows: 

1. Identity Proof: Aadhaar card, PAN card, Passport, etc. 

1. Address Proof: Water bill, Electricity bill, Aadhaar card, etc. 

1. Income Proof: ITR form, Salary slips not more than three months old, etc. 

1. Bond Certificate: Certificate proving bond ownership in demat form. 

1. In the case of a partnership or proprietorship, you will also have to provide an audited balance sheet and profit-loss statement for the previous two years. 

1. Multiple copies of passport-sized photographs. 

Note: The above-listed documents are required in general, and additional documents may be requested by the lender. 

How to apply for a loan against bonds online? 

Follow the steps given below to apply for a loan against bonds online: 

Step 1: Visit the official website of the bank or lender providing a loan against the bonds. 

Step 2: You need to look for a loan application form online.  

Step 3: Fill out the loan application form and submit it along with the required documents. 

Step 4: The lender will verify all the information provided and documents. 

Step 5: Once the verification is done, the bonds will be transferred to the lender’s demat account, and the lender will disburse the loan amount. 

How to apply for a loan against bonds offline? 

To apply for a loan against bonds offline, you need to visit the lending bank’s branch along with all the required documents. You need to fill out the application form and submit it at the lender’s office. The lender will then review your application and verify all the details provided. If the verification is successful, the bonds will be transferred to the lender, and you will receive the loan amount. 

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