A Loan Against Securities (LAS) is a type of secured loan where individuals pledge their securities, such as stocks, bonds, mutual funds, or insurance policies, as collateral to access funds for immediate financial needs. This option enables investors to leverage their investment portfolio without needing to liquidate assets, thus preserving their long-term growth potential.
The loan amount typically depends on the market value of the securities pledged and can be as high as 50-80% of the portfolio value, based on the type of securities and the lender’s policy. The borrower continues to retain ownership of the pledged securities, allowing them to benefit from potential capital appreciation and dividends.
Advantages of Loan Against Securities:
Types of Loan Against Securities:
Overdraft Facility Against Securities
This facility allows the borrower to withdraw funds as needed up to a sanctioned limit based on the value of the pledged securities. Interest is charged only on the amount utilized, offering a cost-effective solution for meeting short-term liquidity needs.
Term Loan Against Securities
In this option, the borrower receives a lump sum loan amount against the securities, repayable in structured installments. The loan amount is calculated as a percentage of the pledged securities’ value, and terms are usually flexible to accommodate the borrower’s financial goals.
How Loan Against Securities Works:
1. **Selection of Securities**: The borrower can pledge approved securities such as shares, bonds, or mutual funds.
2. **Valuation and Approval**: The lender assesses the market value of securities and approves a loan limit accordingly.
3. **Loan Disbursement**: The approved amount is disbursed, allowing borrowers to use the funds for personal or business needs while keeping their portfolio intact.
