FAQs: Loan Against Securities (LAS)

LAS is a loan facility where you can pledge your securities like stocks, bonds, and mutual funds as collateral to secure a loan. This allows you to access funds without having to sell your investments¹.

Unlike traditional loans that may require property or a high credit score as security, LAS uses your investment portfolio as collateral. This often results in lower interest rates and more flexible repayment options.

You should consider applying for LAS without liquidating your investments when you need immediate funds. LAS can be used for various purposes such as funding education, covering medical expenses, taking a vacation, managing business cash flow, purchasing a vehicle, or consolidating credit card debt. It’s a flexible solution that allows you to leverage your investments to meet your financial needs while still benefiting from the growth of your securities.

You can pledge various securities including equities, bonds, mutual funds, and government securities. The specific securities accepted may vary by lender¹.

The loan amount is typically a percentage of the value of the pledged securities, known as the 'loan to value' (LTV) ratio. This ratio can vary depending on the lender's policies and the type of securities pledged.

One can avail up to -

For example, let's say you have INR 2L in debt funds and ₹1L in equity funds. Your eligible loan amount will be = (0.75 x ₹ 2L) + (0.45 x ₹ 1L) = ₹ 1.95L

While the above holds for most funds, the loan-to-value percentage can sometimes vary scheme-wise. Only non-demat mutual funds are supported for a loan at this moment.

The loan amount might get lowered during the application in case you have the following

When you take a loan against your investments, your securities are pledged as collateral but remain in your name. You continue to own your investments and earn any dividends or interest they generate. However, you cannot sell these securities unless the loan is repaid in full¹.

The credit limit for a loan against securities is typically lower than the total value of the investments to protect the lender from market fluctuations. This difference accounts for the loan-to-value (LTV) ratio, ensuring the loan amount remains within a safe margin of the securities value.

A Term Loan is a fixed amount of money borrowed for a set period, with scheduled repayments. An Overdraft is a credit facility that allows you to withdraw money up to an approved limit as and when needed, and interest is charged only on the utilized amount.

You can repay your loan through EMIs or as a lump sum, depending on the terms agreed upon with the lender. Payments can typically be made via online transfers, cheques, or direct debit arrangements.

The customer can choose to pre-close their loan anytime you want after payment of interest and the principal loan amount. There are no foreclosure charges.

The time taken to disburse the loan amount can vary, but post approval of the loan application, and completion of all the documentation your loan amount will be disbursed within 24 hrs.

LAS offers several benefits, including the ability to retain ownership and earn returns on your investments, lower interest rates compared to unsecured loans, and flexible repayment options.

Yes, you continue to earn dividends or interest on your pledged securities. The ownership of the securities remains with you, and only the right to sell them is transferred to the lender as collateral¹.

The application process typically involves selecting the securities you wish to pledge, completing an application form, and submitting any required documentation. The lender will then assess your application and determine the credit limit.

The disbursement time can vary, but many lenders offer quick processing times, sometimes disbursing funds within a few hours of application approval¹.

Most lenders do not charge pre-payment penalties for LAS, giving you the flexibility to repay the loan ahead of schedule without additional costs.

If the value of your pledged securities falls below a certain level, you may be required to pledge additional securities or repay part of the loan to maintain the LTV ratio.