Money is power in today’s time and has been a power since time immemorial. Yes, money is not everything but holds importance in many occasions and time.
Sometimes, there could be situations that may demand an immediate flow of money, and you may not want to resort to a higher interest rate based lending instruments.
In the same context, when you apply for a loan against shares, you may be able to grab a higher amount as the loan value at a lower rate. Since your collateral, in this case, is your shares, you may get a lower loan against shares interest rate.
Other than letting you seize a larger amount as the loan at a lower rate, there are many more viable reasons for availing a loan against share facility.
Here are some reasons that make the loan against share facility a hit. Have a look:
1) The lower rate of interest
The foremost reason for anyone availing loan against shares is the lower rate of interest that comes with it. The loan against share is a secured type of loan which means you are availing the loan by pledging your shares. In case if you fail to repay it, the lender has the right to freeze it to recover the loss. Thus, the major reason for anyone availing this facility is the lower loan against shares interest rate. Hence, when you apply for a loan against share, you get to pay lower loan EMIs.
2) The greater the degree of flexibility
The loan against shares works just like the personal loan as you can use the loan amount for pretty much any reason under the sun. However, lenders may ask you if you are availing the loan to purchase more shares as that’s not allowed. Also, the loan against share will have a lower rate than that of the personal loan as well.
3) Let you enjoy instant liquidity
The loan of this type of nature could be used for emergency purposes, unexpected emergencies, meeting small and big money requirement. Thus, by pledging your shares at a lower rate of interest, you can get easy and instant liquidity.
4) Enjoy paying interest only on the utilized amount
The loan against share is usually an overdraft facility from where you can keep withdrawing money as per your need. Suppose the overdraft facility that you got is of Rs.5 lakh and you availed Rs.50,000 out for it for 1 month and repaid it in 40 days. Now, the interest that will be charged will not be on the whole amount but only on the utilized amount for 40 days and nothing else. Hence, you can enjoy saving on the payment of interest charges as it’s only time based and as per the utilized amount.
5) No prepayment and foreclosure charges
You need not to pay any charges or penalty to your lender for making any prepayment and even foreclosing the account before its scheduled tenor.
The Bottom Line
The loan against shares facility could appeal to you and work wonders when you may need money in many situations.