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If a person owns shares in the open market, they can apply for a loan against shares. There are several benefits attached to availing of such loans<\/a>. The article describes what is loan against shares\u2019 meaning, how the loans against shares process works, and how it benefits people by allowing them to borrow conveniently.<\/p>\n\n\n\n The loans against shares process are loans taken against financial assets like shares, mutual funds or life insurance policies<\/a>. The financial assets act as collateral or surety to the bank.<\/p>\n\n\n\n A loan against shares helps people use their financial assets more efficiently. It prevents people from hastily selling their shares. The limit of loan they can pledge on their shares is based on the number of shares they own and the bank where they are availing the loan.<\/p>\n\n\n\n Market Shares are a vital financial asset. They are instrumental in times of unprecedented need.<\/p>\n\n\n\n After they pledge their shares, the bank gives them a hybrid term loan<\/a> facility, from which they can withdraw any money out of their total loan amount. The applicant will be liable to pay interest only on the amount they withdraw. <\/p>\n\n\n\n The following example helps explain the loan against shares process better:<\/p>\n\n\n\n Suppose an applicant receives a loan of Rs. 2 lakhs<\/a>. The applicant only withdraws Rs. 1.5 lakhs with a repayment tenure of five months. As per the bank\u2019s hybrid term loan policy, they will charge interest only on Rs. 1.5 lakhs (amount withdrawn) and not Rs. 2 lakhs.<\/p>\n\n\n\n Besides, people can also pledge shares of their relatives, including their spouse, parents, and siblings, who are above the age of 18 years. But in this case, the relative has to play the part of being a co-applicant and should sign the hybrid term loan agreement.<\/p>\n\n\n\n Now that you know what is loan against shares\u2019 meaning and how does loan against shares work, let\u2019s move on to the benefits. <\/p>\n\n\n\n The main benefits are as below:<\/p>\n\n\n\n The loan is not dependent on the borrower\u2019s creditworthiness but on the security of the shares he has submitted. Loans against shares are given only to shares which are readily marketable and which are free from disabilities.<\/p>\n\n\n\n Interest Rate is very important for any person pledging a loan. Interest rates vary for all kinds of loans. Secured loans have a lower interest rate compared to unsecured ones.<\/p>\n\n\n\n The lenders will not ask about the meaning of the loan during the approval process. Hence, borrowers have complete freedom in the usage of their loans.<\/p>\n\n\n\n It depends on the stock market assessment performed by the applicant. It allows them to enjoy the benefits of bonuses, rights and dividends, etc. Since the ownership of the financial products remains with the borrower, the idea of a loan proves to be lucrative for them.<\/p>\n\n\n\n Other advantages of loan against shares in India include:<\/p>\n\n\n\n <\/p>\n\n\n\n At Tata Capital, to be eligible for a loan against stocks in India, you need to:<\/p>\n\n\n\n You also need to provide the following documents with the loan application if applying online:<\/p>\n\n\n\n If you\u2019re applying offline, submit the following:<\/p>\n\n\n\n These are the documents that are generally required for loan against stocks in India. However, you may need to provide additional documents depending on which category of borrower you are. <\/p>\n\n\n\n LTV plays a major role in how does loan against shares work, as it determines the maximum loan amount you can borrow.<\/p>\n\n\n\nLoan Against Shares: Meaning & Overview<\/h2>\n\n\n\n
Loan Against Shares Process: Step-by-Step Guide<\/h2>\n\n\n\n
Benefits of Loan Against Shares<\/h2>\n\n\n\n
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Lender\u2019s Name<\/td> Interest Rate<\/td> Loan Amount<\/td> Tenure<\/td><\/tr> HDFC Bank<\/td> As per the bank\u2019s discretion<\/td> Starting Rs.50,000 <\/td> Varies based on the amount of loan <\/td><\/tr> Bajaj Finserv<\/td> 9.50% to 12.00% p.a.<\/td> Up to Rs.10 crore<\/td> Varies based on the rate of interest and amount of loan<\/td><\/tr> ICICI Bank<\/td> Depends on the amount withdrawn and tenure<\/td> Rs.50,000 to Rs.20 lakh<\/td> Varies based on the rate of interest and amount of loan<\/td><\/tr> Tata Capital<\/a><\/td> Starting \u2013 10.50% <\/td> Rs.50,000 to Rs.20 lakh<\/td> One year and it comes with a renewable auto feature<\/td><\/tr> State Bank of India (SBI)<\/td> Depends on the selected scheme<\/td> Rs.20,000 to Rs.5 crore (Depends on the selected scheme)<\/td> Varies based on the rate of interest and amount of loan<\/td><\/tr> Axis Bank<\/td> 10.50% to 12.75% p.a.<\/td> Up to 85% of the value of securities<\/td> Varies based on the rate of interest and amount of loan<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n Eligibility Criteria and Documents Required for Loan Against Shares<\/h2>\n\n\n\n
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How is the Loan-to-Value (LTV) Ratio Calculated for LAS?<\/h2>\n\n\n\n