Loan Against Securities

Loan against security is a loan advance to a customer against a pledge of security. It can be loan against insurance policy, mutual funds, National Savings Certificate and other securities. Loan against security can be given against the following securities:

• Insurance policies
• Non-convertible debentures
• NABARD Bonds
• UTI Bonds
• Mutual fund units
• Demat shares
• National Savings Certificate or KVP, these are accepted in demat form only.

How it works?

Loan against property helps you to avail timely finance instead of selling off the securities in a haste. The limit of the financial assistance depends on the security that you have pledged. Usually a current account is opened in the borrower’s name and the rate of interest is calculated on the amount that is withdrawn by you during the period of utilisation.

When you pledge a security, you get steady cash easily at the time you need it the most and this also means that you won’t have to sell your shares and not benefit from the bonus and dividends.

Compare Loan against Securities offered by different banks 

HDFC Bank Loan against Securities 

Benefits and features of availing HDFC Bank Loan against Securities: 

• Minimum loan starting at Rs.50,000 
• Easy repayment process 
• Transparent processing of loan 
• Interest rate charged on the loan amount used 

Penal charges: 

A penal charge of 18% p.a. plus tax will be levied on the amount drawn in the excess of the limit applicable. 

Bajaj Finserv Loan against Securities 

Benefits and features of availing Bajaj Finserv Bank Loan against Securities: 

• Loan amount of up to Rs.10 crore 
• Relationship manager available 24x7 
• Easy documentation 
• No part payment or foreclosure charges 

Penal charges: 

A penal charge of 2% per month will be charged. 

ICICI Bank Loan against Securities 

Benefits and features of availing ICICI Bank Loan against Securities: 

• Loan based on the value of your securities 
• Easy withdrawal 
• Loan interest will be charged on the amount used by you 

Penal charges: 

A penal charge of 6% plus other applicable rates will be levied on the amount drawn in the excess of the limit applicable. 

TATA Capital Loan against Securities 

Benefits and features of using TATA Capital Loan against Securities 

• Overdraft facility available 
• Zero foreclosure charges 
• Quick processing of application form 
• Security swap facility available 

Penal charges: 

A penal charge of 3% plus outstanding amount per month + GST will be levied on the amount drawn in the excess of the limit applicable. 

SBI Loan against Securities 

Benefits and features of availing SBI Loan against Securities: 

• Loan amount starting at as low as Rs.20,000 and goes up to Rs.5 crore 
• Available in 5 different schemes 
• Relationship manager available 24x7 
• Easy documentation  
• No part payment or foreclosure charges 
• No processing fee for select schemes 

Penal charges: 

A penal charge will be charged at the discretion of the bank and will vary from scheme to scheme. 

Axis Bank Loan against Securities 

Benefits and features of availing Axis Bank Loan against Securities: 

• Loan amount of up to 85% of the value of the securities 
• Processing fee charged at the rate of 0.15% of the loan amount 
• Easy documentation 
• No part payment or foreclosure charges 

Penal charges: 

A penal charge of 2% per month will be charged. 

Features of Loan against Securities 

• Loan against security is a secured Loan. Debentures, shares, bonds or mutual funds are offered as collateral. 
• The tenure of the loan against security is one year, but it can be easily renewed. 
• The rate of interest usually ranges from 12 – 15%. The rate varies from bank to bank. 
• The processing fee is usually charged at the rate of 2% of the loan amount. 
• The loan amount depends on the security the borrower is offering. 
• The no charges for prepayment of the loan. 
• The borrower is required to be within the age bracket of 18 – 65 years to apply for a loan against security. 
• The loan has to be repaid within the fixed period. If the borrower fails to make the payment, the lender can file a case for recovery and the balance amount has to be repaid within 3 years from the date of sanction of the loan. 

Features of a good security is

• The loan is not dependent on the creditworthiness of the borrower but is dependent on the security that he has submitted. The security offered is marketable and doesn’t incur loss. Preference is given to liquid assets like raw materials, manufactured goods, gold, silver, etc.
• The value of the security should be stable and steady and not fluctuate widely.
• The security must be easily transferable. Immovable property is not easily transferable.
• The security must be easily marketable.
• The security must be free from disabilities.

Eligibility criteria

Given below are some of the eligibility criteria you will be required to fulfill in order to be eligible to avail loan against securities from a bank:

• Should be a resident of India
• Should be at least 21 years of age
• You should either be a salaried or a self-employed individual
• The security against which you are availing the loan should be approved by the bank

Documents required for Loan against Securities

Borrower who is salaried must submit the following documents:

• PAN card
• Identity and address proof
• Photograph
• Last 6 months bank statement
• Cancelled cheque
• Demat account statement
• Income proof

Borrower who is self- employed must submit the following documents:

• PAN card
• Identity and address proof
• Photograph
• Last 6 months bank statement
• Cancelled cheque
• Demat account statement
• Income proof
• Balance sheet and profit and loss account
• Office address proof and existence of business proof

Banks offering Loan against Security

• ICICI Bank
• HDFC Bank
• Axis Bank
• ING Vysya Bank
• Standard Chartered Bank of India
• IDBI Bank

Things to consider before availing loan against securities

• Check the eligibility criteria: You must ensure that you meet the eligibility criteria before applying for loan against securities from a bank. Most lenders require the applicant to be 21 years of age in order to be eligible for loan against securities.
• Choose a bank which accepts varied investments as security: You must go for a lender which accepts various forms of investments such as mutual fund, IPO, insurance policies from partner companies, retail shares, etc.
• Choose a bank which offers high amount sanction on low interest: You must avail loan against securities from a bank which offers a high amount sanction against your collateral. There are various lenders in India which offers a high loan amount at attractive interest rates depending on the securities.
• Repayment tenure: You must look to avail loan against security from a lender which offers you a flexible repayment tenure. Generally, the repayment tenure offered is between 1 year to 3 years. However, the repayment tenure chosen by you must depend on the loan amount availed by you.

How to apply for loan against securities?

Online

Today, almost every bank in India provides you with the option of availing loan against securities online. The whole process is fast and hassle-free. You can visit the official website of the bank from whom you wish to avail the loan and click on the ‘Apply Now’ button. You will have to enter the details required by the lender and upload the necessary documents. Once the bank has verified the details and documents submitted by you, the loan amount will be disbursed to your bank account.

Offline

You can visit the nearest branch of the lender from whom you wish to avail the loan along with the necessary documents. An official from the bank will then further assist you with the process of applying for a loan against securities scheme.

Loan Against Securities FAQs

1. Can I foreclose my loan against securities account?

   Ans: Most of the banks in India provides you the option of foreclosing your loan against securities account after the payment of the loan amount including the interest. A foreclosure charge will however be applied. However, the option of foreclosing your loan against security may differ from bank to bank.

2. Can I be informed of my latest limit by email?

   Ans: Yes, the lender will inform you about the latest limit by sending an e-statement to your bank account.

3. Should my securities be in the Demat form?

   Ans: Yes, your securities should be in the demat form. In case you cannot pledge your securities in the demat form, there are banks in India who offer you the option of pleding your securities held with any Depository Participant in NSDL or CDSL.

4. I have my securities in physical form. Can I avail loan against security?

   Ans: Yes, you can avail loan against security by converting your physical securities into a dematerialised form by opening a depository account with the lender.

5. How frequently will my portfolio be reviewed?

   Ans: The majority of the lenders in India review your portfolio on a daily basis. However, an interim revaluation might be required.