You may have built your investment portfolio thinking of future needs, retirement, and emergencies. The various securities you have, be it stocks, mutual funds, bonds and other investments, are a way to grow your wealth and provide liquidity when you face a cash crunch. Since your securities offer high returns, especially when invested in the long term, you no longer need to sell them, to access funds. Instead, you can use your securities in another way, by taking loan against them.
A loan against securities uses your securities as an asset and turns them into collateral. Additionally, your securities continue earn their due dividends and interest from the market all through the repayment tenor. To get started on the right foot, read on to see the questions you need to ask yourself before opting for a loan against securities.
What securities can I take a loan against?
Every financial institution offering a loan against securities has a complete list of approved securities that you can pledge to avail a loan. Mostly, you can avail a loan against shares, bonds, mutual funds, insurance policies, ESOP financing and FMPs. These securities however, vary for every financier.
What is the minimum and maximum amount of the loan I can avail?
Your lender will decide the total loan amount by checking the net worth of your portfolio. Most lenders will allow you to access a high loan amount that corresponds to a significant percentage of the value of your shares and cash deposits.
However, choosing a trustworthy lender like Bajaj Finserv to pledge your securities will give you a chance to avail a hefty sanction as a Loan Against Securities. Here you can get a minimum sanction of Rs.5 lakh and a maximum sanction of Rs.10 crore.
What is the eligibility criteria to apply for a loan against security?
As per the eligibility terms and conditions set by the financial institutions you need to fulfil a minimum criterion to be eligible for a loan against securities. Most lenders are likely to approve a loan if your securities folio amounts to at least Rs.10 lakh and follows the approved scrips list.
Apart from that, you must be a resident citizen of India and at least be 21 years of age to avail a sanction. Additionally, you can be salaried or self-employed, but drawing a regular income is mandatory.
What is the repayment tenor and how flexible is the schedule?
Since it is secured, you can repay the loan against securities via a lengthy and comfortable tenor. This apart, the loan against securities interest rate is also low, owing to the high-value securities you have pledged. Some lenders enable you to access your hefty loan amount with flexible repayment terms. Additionally, you can make part-prepayments or foreclose the loan at no additional cost.
What is the process of application for this loan?
Applying for a loan against securities is both fast and easy. Just check various loan offerings online to compare them at your convenience. Then use the online application system to apply for the loan in just a click. On successful completion of this online process, you will get a primary approval within 5 to 10 minutes on your application.
After this your lender will send across a representative to collect a few basic documents. Then the lender will follow a simple verification process to approve your loan within a few hours.
Usually, it is best to take a loan against securities when you are expecting a certain payout in the coming months and need funds in the interim. Armed with these points find out ways to build and nurture your investment in securities so that you can use them to access funds when required.