There may be times when you may face an acute shortage of funds and find yourself in urgent need of money. Under such circumstances, obtaining a personal loan may cross your mind but may not be feasible. You have an option to liquidate your investments, but why do that when you could take a loan against them. Yes, a quick solution for your emergency fund requirement would be to seek the Loan Against Shares facility from the securities in your Demat account. Are you wondering how that works? Well, let’s have a look.
What is Loan Against Shares, and how does it work
Loan Against Shares (LAS) is a borrowing facility that enables you to receive a loan against your financial assets like the shares in your Demat account. All you need to do is pledge these shares as collateral to help you get a speedy loan. However, you need to remember that your loan amount will depend upon the market value of shares pledged. Once done, you will get an overdraft facility with a fixed limit. The interest charged on this loan will only apply to the borrowed capital.
Who can apply for LAS
While the eligibility criteria may vary at every lending institution, there are specific essential criteria that need to meet.
- Be a resident of India
- At least be 18 years old
- Have a Demat account with any depository participant
How to apply for LAS
The application process is simple. It can be done as under:
- Offline mode: You can visit the office of any lending institution or its branch to fill out the application form physically. While filling out the form, you will need to submit your KYC details and shares you want to pledge.
- Net banking: You also have an option to log in through your net banking, accept the terms of the agreement, and select the securities you wish to pledge.
Basic documents required are:
- Copy of your PAN and Aadhar Card as identity proof
- Copy of your passport size photograph to fill out the loan application form
- Copies of your address proof
- For loans above a specific limit copies of your bank statements (last 3-6 months), or IT returns (last 2 years)
Once the documents are verified, you will receive funds into your bank account immediately. Let us now look at the key features and benefits of this facility.
What makes LAS so attractive
When it comes to taking a loan, it is very important to understand the purpose of the loan and the costs involved. However, Loan Against Shares do have their own set of advantages. Such as:
- It will provide you with an option of flexible repayment.
- In the event of default, your lending institution can realize it with your pledged shares. This also makes the process of repayment easier.
- You will have to pay interest only on the amount utilized.
- Since the market is volatile, there is a periodic revaluation of your pledged shares.
- The loan will be disbursed accordingly to the market value of your pledged shares.
What gives LAS an edge over personal loans
One of the most important advantages of opting for LAS is that your investments continue to grow during the loan period. Apart from that, the are many more reasons why LAS may be the right choice for you instead of a personal loan. Like:
- You will incur a lesser rate of interest as compared to a personal loan.
- You can get a quick disbursal of the loan.
- It requires a low processing fee.
- It is easy, convenient, and requires minimal documentation.
- Your eligibility for this loan is not dependent on your credit score.
- In case of failure to repay, your loan is easily realizable.
Loan Against Shares is a prompt facility that will come to your rescue in times of financial need. It is easy, hassle-free and the only collateral you need to provide are your listed shares.
At Geojit, with our decades of stellar reputation and impeccable track record, we commit to helping you obtain a Loan Against Shares at an attractive low-interest rate. This will help you reduce the cost of financing directly and the cost of investment indirectly. With minimal documentation and a low processing fee, we will promptly ensure that you receive your funds with complete transparency. Click here to know more or get in touch with our experienced financial professional today.