The Beginners Manual To Taking A Loan Against Shares

With the rising expenses and the need for quick money, taking loans have become a commonplace in today’s world. Loans, however, are a very financially constricting and complex process to go into. This has led to the rise of loans against other assets and financial securities. A loan against shares, since it is a fairly new concept, can be confusing to get around at first.

So here are some of the questions that you are most likely to have while taking a loan against shares:

How do loans against shares work?

A loan against securities or shares is when you pledge your shares to the bank in exchange for money as a loan. The bank evaluates your stock portfolio and based on the market value of the shares, a loan amount of 70-80 percent of the total share value. The bank will evaluate the total value of the shares and convert them into their monetary value in an account. You can then withdraw the cash you require from that account and you will accordingly be charged interest. The loan period will also depend on the valuation of the shares. The minimum loan that can be taken against shares is 1 lakh and the maximum is 20 lakhs.

Who is legible to take a loan against shares?

The main and only criteria for the eligibility of taking a loan against shares is that the borrower must be over the age of 18 and must be an Indian citizen. Apart from this, you will be required to submit various legal documents, including asset and property declarations. You will also need to have a regular source of income which proves that you will be able to pay back the loan and will not default it. The shares must also be from a registered

When is the best time to take one?

Since shares are a very fluctuating financial source and depend on the entire stock market value of the company, it is always dependent on the current trend in the stock market. Shares can also be very unpredictable and can rise in value exponentially within a day or two which is why it is better to retain your shares. Therefore, you should go for a loan against shares only if you are in immediate need of liquid cash. Since this loan will give you access to an account with liquid cash, it can be used in situations of emergencies/need.

What are the benefits of taking a loan against shares?

There are numerous benefits of taking a loan against shares, some of them are:

• No EMI – Since the loan is based on the amount you withdraw, there is no fixed monthly amount.  This will not be as pressurising as a normal loan.
• Loan amount – In this loan, you can get up to 80 percent of the share value for the value. However in a normal loan, you will need to give 15per cent of the whole loan amount as the principle even before the beginning of the loan period.
• Options – Since the loan is entirely dependent on the strength of the shares, the security options to choose from is also high.
• Interest payment – There is no high-interest percentage that you will need to pay regardless of whether you use the loan amount or not in this loan. The interest only applies to the amount of money you withdraw.
• No additional charges – there are no additional or hidden charges in a loan against shares. Unlike other loans, there are no pre-payments or post-dated cheques.

An important thing to remember while taking this loan is that since it is a short-term loan, it is always better to pay it off as soon as possible. With so many benefits and ease of access getting this loan for some immediate financial assistance, is an ideal plan of action. Ensure you go to Professional Banks and Financial Institutions and you are good to go!