Why Loan Against Securities is an Ideal Substitute for Personal Loan?

30 January, 2023

When you need money urgently, your first instinct is to opt for a Personal Loan. Due to the secured nature of this loan, lenders may insist that you fulfil their preapproved eligibility criteria to qualify for the loan. If you cannot produce the required credit score or if your monthly income is lower than the required range, the lender may reject your Personal Loan application. However, you need not lose hope as you can obtain a Loan Against Securities. Let us understand what such a loan entails, its features and why it is an excellent substitute for Personal Loan.

Loan Against Securities – Meaning and Explanation

Loan Against Securities, as is apparent from the term, is the type of loan you can obtain by pledging your shares and other market securities as collateral. This is a secured loan under which the lender takes possession of your securities, such as shares, mutual funds, bonds, life insurance policies, NSC/KVP etc., and determines the loan amount based on the securities pledged. This convenient loan is sometimes also referred to as a Loan Against Shares or a Loan Against Securities especially if you have pledged shares or financial securities.

• Flexible Eligibility criteria
  
  Lenders typically do not set any fixed eligibility criteria for Loans Against Securities. You need not bother or comply with factors such as your age, employment status, or monthly income. Lenders also do not ask you to provide your credit score to determine your repayment capacity. As such, the eligibility criteria for Loans Against Securities are pretty straight forward. You must simply have enough securities to pledge to acquire the loan amount you need. So long as you can pledge your securities as collateral, you can obtain the loan easily.
  
  

• Loan Amount
  
  Another reason to consider a loan against shares and securities is that you can get a high loan amount without any specific limitations. You can obtain anywhere from 50% to 80% of the current market value of your shares, mutual funds, life insurance policies, non-convertible debentures and other such assets, depending on the securities you pledge.
  
  

• Documentation and Servicing
  
  An excellent attribute of the loan against securities is that you can get quick disbursal of funds. Most lenders offer door-step services and process your loan quickly. You essentially need to provide copies of your investments pledged along with the basic ID, address, and signature proof documents. You can provide these documents online since the entire process is automated and digital. Once lenders finish assessing the total value of the securities pledged, they disburse the loan amount directly into your account.
  
  

• Interest rate
  
  The interest rate for Loan Against Securities is usually low since the bank has some form of collateral in the securities pledged. Moreover, you do not have to worry about paying interest on the entire loan amount. Instead, the lender only levies interest on the actual loan amount you use. They also calculate interest on the daily outstanding amount and debit it from your account at the end of each month during the loan period.
  
  

• No end-use restrictions
  
  The Loan Against Securities comes without any end-use restrictions. You can use funds from the loan to finance any need you may have, other than utilising it for speculative reasons like share market investments. As such, you can pay for medical emergencies, fund business expansion, pay for leisurely expenses and so on, without providing any reasons to the lender.
  
  

Apply for HDFC Bank’s Loan Against Securities

Now you can pledge your securities with HDFC Bank and obtain quick financing on the go. The low interest rates coupled with efficient servicing and digital documentation process make the Loan against shares a convenient option when you need funds urgently. Click Here to apply.

Eager to learn about Benefits of Digital Loan against Mutual Funds? Click Here.

*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.