Loan Against Securities Make your existing investments work for you  

Features of LAS:

A loan against securities (LAS) is a facility that allows you to borrow funds by pledging your financial assets, such as shares, mutual funds, bonds, or ETFs, as collateral.

When you need liquidity but do not want to sell your investments. By opting for an LAS, you can get access to funds without disrupting your long-term investment goals.

Interest rates for these loans are generally lower compared to unsecured loans, making them a cost- effective borrowing option. Moreover, since you are not selling your securities, you continue to benefit from potential capital gains and dividends. This enables you to manage cash flow gaps efficiently while keeping your investment strategy intact.

FAQS

Answers to common Questions

Typically, banks and financial institutions accept a variety of securities as collateral, including shares, mutual funds, bonds, and ETFs. However, the specific securities accepted can vary by lender, and not all securities may be eligible.

The loan amount generally depends on the type and value of the securities pledged. Lenders usually provide a certain percentage of the securities' market value, known as the loan-to-value ratio (LTV). This ratio can vary but often ranges from 50% to 70% for stocks and can be higher for bonds and mutual funds.

Interest rates for LAS are typically lower than those for unsecured loans but higher than home loan rates. The rates can depend on various factors including the lender's policy, the type of security pledged, and the borrower's credit profile.

The repayment structure for LAS can vary widely among lenders. Some may offer flexible interest payment options with the principal payable at the end of the loan term, while others may require monthly installments. It's important to understand the repayment terms before taking out the loan.

If the market value of the pledged securities decreases significantly, the lender may ask you to provide additional securities or cash to maintain the loan-to-value ratio, known as a margin call. Failure to meet the margin call can result in the lender selling your securities to recover the loan amount.

Yes, you continue to own the securities and thus remain eligible for any dividends, interest payments, or bonuses issued during the loan term. However, voting rights might be suspended during the tenure of the pledge.

Interest paid on the LAS can be claimed as a deduction under certain conditions if the loan is used for business purposes. However, it's essential to consult with a tax advisor to understand the specific tax implications based on your circumstances.

Most lenders allow you to prepay the loan without any penalty, but this can vary. It’s wise to check the prepayment terms to understand any possible charges or conditions.

Most lenders allow you to prepay the loan without any penalty, but this can vary. It’s wise to check the prepayment terms to understand any possible charges or conditions.

Lenders may charge processing fees, valuation fees, or annual maintenance fees for managing the pledged securities. It's important to inquire about all possible fees to understand the total cost of the loan.
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