A Loan Against Securities is a financial agreement in which individuals or businesses pledge their existing securities as collateral to secure a Loan. This facility allows borrowers to access funds without liquidating their investments, thereby maintaining their portfolios. The securities eligible for such Loans can differ based on the lending institution's policies and prevailing market conditions.

Commonly accepted securities for Loan Against Securities

• Equity shares: Listed equity shares of reputable companies are commonly accepted as collateral. Their liquidity and marketability make them favourable for lenders.
• Bonds and debentures: Government and Corporate Bonds and Debentures are often considered eligible securities. Their fixed-income nature and lower risk profile enhance their acceptability.
• Mutual Fund units: Units of established Mutual Funds, especially those with a strong track record, can be pledged to secure a Loan. The underlying assets and performance history of the Mutual Fund influence their eligibility.
• Fixed Deposits: Term Deposits held by financial institutions are typically accepted as collateral. Their guaranteed returns and low risk make them a preferred choice for borrowers and lenders.
• Government Securities: Securities issued by the government, such as Treasury Bills and Government Bonds, are considered low-risk and are readily accepted for securing Loans.

Process of availing an Instant Loan Against Securities

• Application: The Loan borrower applies for securing an Instant Loan Against Securities with details of the securities to be pledged.
• Valuation: The lending institution assesses the market value of the pledged securities to determine the Loan amount.
• Loan sanctioning: The Loan amount and terms are finalised based on the valuation and the borrower's credit profile.
• Disbursement: Upon agreement, the Loan amount is disbursed to the borrower's account.
• Repayment: The borrower repays the Loan with interest as per the agreed-upon schedule to reclaim the pledged securities.

Eligibility criteria

• Age: Typically, borrowers should be between 21 and 60.
• Income: A stable income source is essential to ensure timely repayment.
• Credit history: A good credit score enhances the likelihood of Loan approval.
• Securities quality: The quality and liquidity of the pledged securities are crucial.

Interest rates and Loan terms

Interest rates for Loans Against Securities are generally competitive and depend on factors such as the type of securities pledged, the LTV ratio, and the borrower's credit profile. To suit the borrower's financial situation, lenders may offer flexible repayment options, including bullet payments or equated monthly instalments.

Benefits of Loan Against Securities

• Quick processing: The Loan approval and disbursement process is typically swift, providing immediate liquidity.
• No need for asset liquidation: Borrowers can access funds without selling their investments, allowing them to benefit from potential future appreciation.
• Competitive interest rates: Secured Loans often have lower interest rates than unsecured ones.

Conclusion

A Loan Against Securities offers a convenient financial solution for individuals and businesses seeking liquidity without liquidating their investments. By understanding the securities eligible for such Loans and the associated processes, borrowers can make the right decisions that align with their financial goals.