What is a loan against security?
Loan Against Security is a kind of overdraft facility. that enables you to meet your financial objectives without losing the ownership or advantages of the securities. loan against securities are available at a lower interest rate as compared to personal loans due to being the secured type of loans.
You can borrow a high amount against your financial assets, depending on your choice of lending institutions. An investor can easily qualify for these loans.
loan against the securities option, and rates
You can find numerous brokers who offer loans against securities. Most banks and Non bank Financial Companies (NBFCs) with asset sizes of 100 crores and above also provide these loans. The interest rate charged on loans against securities can be between 7.5% to 12% with most lenders.
Common securities that can be utilised to get a loan are equity shares, Gold Deposit Certificates (GDC), UTI and government bonds, mutual funds, Life Insurance Policies, National Savings Certificates (NSC), Kisan Vikas Patra (KVP), tax-free bonds.
Every financial institution has a different interest rate to provide loans against securities and a different list of approved securities to approve loans against securities applications.
Only a few institutions provide you with loans against securities at a low-interest rate. As an authorised Loan Against Securities facilitator, Financials institutes provides you with multiple lender options, charging as low as an interest rate of 7.5 %. You can pay interest only on the loan amount utilised instead of the approved amount as this is an overdraft facility.
You can choose the securities to pledge from a list of 800+ approved securities. When you take loan against your securities the ownership remains with you.
You will continue to reap the corporate benefits of your securities – dividends, interest, bonuses, and rights issues. However, the lenders can liquidate your assets in case of non-payment. Therefore, you should restrict your usage from the sanctioned limit and repay the loan timely without fail.
Which Loan Against Security Option is Best for You?
Loan Against Fixed Deposit
loan against a fixed deposit is the easiest route an individual can opt for. Fixed deposits can be availed with an amount as low as 1,000. Fact that a fixed deposit is a very low-risk product, you can get a loan up to 80%-90% of the value of the said security.
Loan Against Shares
As shares are believed riskier just like equity funds. one can get a maximum of 65% loan on the market value of the said security.
Loan Against Bonds
If you are 10 and 20 years bond holder you can get loan against bonds facility. You may get as much as 80% of the value of bonds.
Loan Against Life Insurance Policy
Lenders can as well grant loans against endowment policies of life insurance. Loan against insurance can facilitate around 75%-85% value of your life insurance.
Since it’s a few loans, you need to not select risky money security to grab it. If the chosen security will go down apace in its price, you won’t realize it is okay to pay the loan EMIs.
That’s why it’s sensible to choose safer security to sway far away from the fast market fluctuations. ask the financial experts what is right for you.