A loan against securities allows every investor to raise funds by leveraging the existing funds. During the period of loan tenure, the borrower consistently receives the credit of bonuses, interest as well as securities.
What Is A Loan Against Security?
A loan against security is regarded as a loan advance given to a particular customer against the pledge of his/her security. The loan could be against a National Savings Certificate, Insurance Policy, Mutual Funds Or Any Other Type Of Security.
A list of different types of securities against bank loans:
- Demat Shares
- Insurance Policies
- Uti Bonds
- Non-Convertible Debentures
- Nabard Bonds
- Mutual Fund Units
- Gold Mutual Fund/Gold Bonds/Gold In A Demat Form.
KVP or National Savings Certificate, are also widely accepted in the form of demat only.
How Does Loan Against Securities Work?
A loan against security helps individuals to avail finance within the required time in place of selling off any kind of securities in haste. Depending on the type of security, the limit of your financial assistance is set against what has been pledged.
Generally in the name of the borrower, an overdraft account is opened. The calculation of the interest rate is done on the withdrawn amount during the ongoing period of utilization.
When a pledge is taken against security, it becomes easy to get cash when you require it urgently and this doesn’t mean that the borrower has to sell their shares and be unaware of the advantage from dividends as well as bonuses.
What Are Some Of The Features Of Loans Against Securities?
The features are as follows:-
- A loan against security falls under the category of secured loan. Bonds, shares, mutual funds, as well as debentures, are offered as collateral.
- The amount of the loan is dependent on the offered security of the borrower.
- The loan tenure against security is generally one year and the renewal process is quite easy. The interest rate values are low comparatively.
- The charge of processing fees is nominal.
- It’s important on the part of the borrower to be within the age of 18-65 years for applying for a loan against security.
How To Determine Good Security?
To determine good security, take care of the following factors:-
- If the credit score of the borrower is not good enough, the borrower would get the loan against the security.
- Security must be easily transferred.
- It must be simple to sell the security and hypothecated.
What Is The Eligibility Criteria To Apply For A Loan Against Securities?
Given below are a few of the important eligibility criteria which is required to be fulfiled for being eligible to apply for a loan against securities from a bank:
- Must reside in India
- The age should be at least 21 years
- A borrower should either be a self-employed or salaried individual
- The mortgage security must gain approval from the bank.
What Are The Necessary Documents Required For A Loan Against Securities?
The salaried individual must submit the following documents:
- Income proof
- PAN card
- Demat account statement
- Copy of given security (bond, share, etc.)
- Identity and address proof
- Last 6 months’ bank statement
- Cancelled cheque
The facility of loan is considered to be an outstanding alternative for every long term investor as this loan allows you to monetize your investments to raise funds for personal or corporate purposes.
Ruloans is India’s leading financial products distribution company that helps manage your financial needs be it Home Loans, Personal Loans, Loans against Property, Business Loans, Auto Loans, Credit Cards, Balance Transfers, and many more. Our vision is to be recognized for value creation, transparency, and the largest distribution capabilities in the financial industry. We also have an exclusive DSA Partner Program for several professionals to leverage their skills and make the most benefits. Ruloans is present across 1200+ locations with over 7000 employees, consultants, and referral partners. Ruloans association with ~150 financial institutions including banks, NBFCs, and Fin-tech gives a wide choice for customers to choose from. We help you borrow right.