Introduction:
Loans against securities have become a preferred choice for individuals seeking liquidity while retaining investment growth potential. This distinctive form of lending enables individuals to leverage their securities, such as shares, bonds, or fixed deposits to avail of a loan. Understanding this loan avenue is critical for informed financial decision-making, which necessitates a look at the top ten points about loans against securities.Â
1. Understanding Loan Against Securities:
A loan against securities (LAS) or a loan against fixed deposit, is a secured lending mechanism where securities act as collateral. Borrowers can use financial assets like shares, mutual funds, bonds, insurance policies, and fixed deposits to get loans. This offering enables an individual to get instant liquidity without liquidating their investments.
2. Benefits of Loan Against Securities:
The significant benefit of loans against securities is they provide ready liquidity without necessitating the sale of assets. Borrowers have an opportunity to continue earning returns on their investments while having access to instant cash. This feature makes LAS a convenient option during emergencies where liquid cash is needed.
3. Eligibility Criteria:
Banks or financial institutions have their own set of eligibility criteria for loan against securities. In general, all resident individuals holding operational demat accounts or fixed deposits are eligible to apply.Â
4. Interest Rate:
Usually, the interest rate for loans against securities is lower than personal loans since they pose fewer risk factors for the lender. Interest is only charged on the utilized amount and not on the entire loan limit, making the EMI affordable.
5. Loan-To-Value (LTV) Ratio:
LTV is a critical factor in assessing the loan amount you can avail against the collateral. This proportion signifies the value of the loan against the total value of your securities.Â
6. Types of Securities Accepted:
The type of security that can be pledged depends on the policy of the lending institution. Some common types include life insurance policies, National Savings Certificates, Kisan Vikas Patra, mutual funds, bonds, and shares.
7. Documentation and Disbursal:
The documentation process for loans against securities is straightforward and hassle-free. It generally includes proving identity, address, holding statements of mutual funds, shares, and bonds, etc. Once documentation verification is done, the loan disbursal is usually instant.
8. Tenure of the Loan:
The tenure of the loan offered against securities is flexible. In the case of loans against fixed deposits, the loan tenure cannot exceed the remaining period of the fixed deposit.
9. Defaults and Consequences:
In case of loan default, the lender can sell off the securities to recover the loan amount. However, given that such securities are volatile, if they’re unable to cover the loan value, the borrower is still liable for the shortfall.
10. Restriction of Usage:
There are no restrictions on the end-use of the funds availed from a loan against securities. These funds can be used for any personal or business need.Â
Enhancing Your Loan Experience with Bajaj Finserv App:Â
To streamline and enhance your loan journey, consider using the Bajaj Finserv app. This app provides a user-friendly platform to apply for loans against securities, compare interest rates, and manage your loan efficiently. With features like instant loan approval and easy documentation, the Bajaj Finserv app simplifies the entire process. Download the Bajaj Finserv app today and experience a seamless loan management process!
Conclusion:
Loans against securities can be a handy borrowing option for immediate cash requirements, especially when you don’t want to sell your investments. Before opting for this loan, take your time to understand its terms and conditions to make the most of this facility. Advancements in the digital lending environment have made the process of availing LAS convenient and quick.Â
To make your loan journey simplified, you can compare various bank’s offerings, visit financial aggregator websites, or refer to platforms like Buddy Loan to get a comprehensive idea about the lending landscape. Understanding the critical aspects like interest rates, LTV ratio, and tenure helps in better product selection and achieves financial goals in an efficient manner.Â
In conclusion, loans against securities are an excellent financial instrument that combines the benefits of liquidity and investment retention. By being aware and informed about the crucial parameters surrounding these loans, one can effectively leverage this offering to meet financial requirements efficiently.Â
