When it comes to investments, you will find many investors build portfolios of mixed options such as deposits, bonds, mutual funds, equity shares and more.
When they face some urgent or unexpected requirement, they are unsure about whether to liquidate investments or raise funds. What’s more, they are even concerned about rebuilding their asset.
In the same context, a loan against security offered by leading banks, non-banking finance companies (NBFCs) and other financial intuitions could serve as a lucrative alternative.
Collateral or Security
Banks, NBFCs other financial institutions offer an exhaustive list of eligible securities against which they can easily offer a loan. However, a lien or collateral needs to be kept in order for the loan to be applied and availed. The value of the offered loan is a percentage of the worth of the securities, which could vary anywhere between 50% (for equity shares), and about 90% (for bank deposits).
A current account with the facility of an overdraft is initiated, and a borrowing limit is also set depending on the value of the securities and collaterals. Investors are entitled to withdraw from their accounts as per their needs, and can repay it by simply depositing the money into their current account. As a result, the process is simpler and flexible as compared to an EMI operated loan plan.
The loan against securities interest rate is comparatively lower than that of a credit card or a personal loan because it has collateral attached to it, making it secure for lenders. The loan against securities interest rate is charged monthly, on the basis of daily outstanding balance in the overdraft’s account.
After the limit is approved depending on the collateral’s worth, investors are allowed to withdraw the loan amount as per their needs. It also includes ATM and internet banking facilities. Repayment is also allowed and could be made as per the availability of the cash inflows at any time.
Vital LAS Points to Note
A loan against security (LAS) is often provided only to resident investors in the provided format. One needs to get in touch with a bank or an NBFC for other products if you are an NRI, HUF or any other individual.
Always be informed to know that additional or extra charges for the maintenance of the overdraft account, stamp duty, and processing on loan agreement are relevant to loan against securities transactions.
The Bottom Line
Now that you just went through the basics of availing a loan against securities (LAS), it is easy to make the most of it in India if you are faced with an urgent need for money. Leading banks and NBFCs won’t take much time to approve your LAS application. You can also expect for the money to be credited soon! Happy loan against securities application!