Loan against Securities: Interest Rate, Fees and Charges

A loan against securities is a type of loan where you use your investments, like stocks, bonds, or mutual funds, as collateral to borrow money. This loan is attractive because it gives you quick access to cash without selling your investments. In this article, we will explain the interest rates, fees, and charges involved in a loan against securities in simple terms.

Interest Rate

The interest rate on a loan against securities is usually lower than the rate on unsecured loans like personal loans. This is because the lender has your investments as collateral, which reduces their risk. The interest rate can be either fixed or floating. A fixed rate stays the same throughout the loan period, while a floating rate can change based on market conditions.

Fees and Charges

When you take a loan against securities, you need to be aware of several fees and charges:

1. Processing Fee: This is a one-time fee for processing your instant loan application. It usually ranges from 0.5% to 2% of the loan amount.
2. Documentation Charges: Some lenders charge a fee for the paperwork required for the loan.
3. Valuation Fees: If the lender needs to assess the value of your securities, they might charge a valuation fee.
4. Prepayment Charges: If you repay the loan before the end of the loan period, some lenders might charge a penalty.
5. Other Miscellaneous Fees: These can include charges for late payment, cheque bounce, or any other specific service requested by the borrower.

Loan Eligibility

To get a loan against securities, you need to meet certain requirements set by the lender. Common loan eligibility requirements include:

• Age: Usually, you must be at least 18 years old.
• Ownership of Securities: You must own the securities you are pledging.
• Value of Securities: The value of your securities should be enough to cover the loan amount.
• Credit Score: A good credit score may help you get better interest rates.

Also Read: Personal Loan Statement – How to download and view the statement

Documents Required

The documents needed for a loan against securities are usually simple. Typical documents include:

• Identity Proof: Passport, Aadhaar card, PAN card, or any other government-issued ID.
• Address Proof: Utility bills, rental agreement, or any other valid proof of residence.
• Proof of Ownership of Securities: Demat account statement or physical share certificates.
• Photographs: Recent passport-sized photographs.

Benefits of a Loan Against Securities

• Quick Access to Funds: You can get money quickly without selling your investments.
• Lower Interest Rates: These loans usually have lower interest rates compared to unsecured loans.
• Flexibility: You can continue to earn dividends or interest on your pledged securities.
• No End-Use Restriction: You can use the loan amount for any purpose.

Airtel Personal Loan: An Alternative

While a loan against securities is a great option for those with investments, not everyone has enough securities to pledge. In such cases, an Airtel personal loan can be a good alternative. Airtel offers instant personal loans with minimal documentation and quick disbursement. However, personal loans usually have higher interest rates compared to loans against securities since they are unsecured.

Conclusion

A loan against securities provides a convenient way to access funds without selling your investments. By knowing the interest rates, fees, and eligibility criteria, you can make the best choice for your financial needs. If you don’t have enough securities, considering alternatives like Airtel personal loans can help you get the funds you need quickly. Always compare different options and read the terms carefully before taking a loan.

Also Read: What is the impact of MCLR Hike on Personal Loan rates?

FAQs

1. What is the maximum loan amount I can get against my securities?

The maximum loan amount depends on the value and type of securities you pledge. Usually, lenders offer 50-75% of the value of the securities.

1. Can I still trade my securities after pledging them for a loan?

No, once you pledge your securities as collateral, you cannot trade them until the loan is repaid.

1. How quickly can I get the loan amount?

Once the documentation is complete and the securities are verified, the loan amount is usually given within a few days.

1. What happens if the value of my securities falls?

If the value of your securities falls significantly, the lender may ask you to pledge more securities or repay part of the loan.

1. Can I pledge mutual funds for a loan against securities?

Yes, you can pledge mutual funds for a loan against securities.