How to apply for Loan against securities| Loan against securities complete process

We all do investments to secure our future and to fulfill future requirements. It might be small or big as per our current earnings and net saving but the main purpose of our investment is to grow our savings and become financially independent. It is a long process. But many times, during this journey, we face a financial crunch due to some urgent requirements. In this case, if we sell our investment it will impact our future net savings and we will miss opportunities that may come from our current investments. To avoid such a situation, a Loan against securities comes in very handy and will help us to raise funds against our securities without compromising to sell them for current needs. Further, the interest rate is also very competitive as compared to a personal loan.

Meaning by Securities

Now let us first understand what is securities all about? We all heard about securities in financial terms. In simple words, securities mean financial instruments/documents which is negotiable & hold some monetary value. The issuer of this kind of securities could be a Government, bank, or even a public listed company.

loan against securities detail
loan against securities detail

Types of Securities

  • Equity (Securities)– it is equity stock issued by Public listed companies like Tata, Reliance etc. We can buy or sell it at stock exchange i.e. National stock exchange (NSE) or Bombay stock exchange (BSE). Holders of these securities are called shareholders.
  • Debt (Securities)- Common examples are banknotes (promissory notes, bonds or Treasury notes, Mutual Funds, Life insurance policy). It is different from equity as it issued by companies or Government to raise funds and promise to pay principal amount along with interest at predefined interest rate. Government bonds are more safe as compare to company’s bond. It could be issued for a certain period such as 1 year, 2 years or even for 10 to 15 years.
  • Example of govt securities are gold deposit certificates(GDC), National saving certificates(NSC), Kisan vikas Patra (KVP) and Nabard’s bhavishya Nirman Bonds. Non-convertible debentures issued by Public limited companies are also an example of debt securities. 
  • Derivatives- Derivatives are financial contracts which is complex in nature, linked with an asset. These assets may or may not be current, physical, intangible and operating. Value of such derivatives depend on these assets. It is mostly traded by hedge funds to minimize their risk.

This is the basic concept to understand before we move on to our main topic.

Loan against Securities: benefits/features

A loan against the securities will help us to get funds against our invested securities without transferring/selling them and as the name suggests, it is a collateral loan like a home loan or car loan. Following are the benefits which we can avail and take loan against securities: –

  • Transfer or sell not required– We need not to transfer or sell our securities for raising funds. By pledging them, we can raise funds for our urgent needs.
  • Instant loan against Securities-We can get instant loan against our securities, which could be an equity shares/Mutual funds/bonds or even Insurance policies.
  • High value of Loan-On our pledged securities, we can get loan from up to 80% on securities value, depending upon type of securities.
  • Utilize for multiple Requirement-According to our need, we can utilize it for any purpose other than speculation activities or illegal activities.
  • Overdraft facility-If we opted overdraft facility then loan will approve in current account with overdraft facility. We can utilize funds as per our own requirement.
  • Interest on actual Usage-Interest will be charged only on utilized funds irrespective of approved loan amount.
  • No Prepayment/Foreclosure charges-On loan against securities, we can foreclose as there is no additional charges.

Loan against Securities: Eligibility Criteria

For eligibility criteria, we should know the following points: –

  • Applicant should be Indian national
  • It could be resident Indian or Non Resident Indian
  • Age should be 18 years and above, in case of an individual
  • Non individuals such as HUF, Partnership firm, Limited liability partnership(LLP), Private limited company and Public limited company (listed or unlisted) are also eligible

An important point to understand here is for individuals (resident or non-resident), a loan is available against equity and debt securities as well.

For all non-individual entities loan is available against debt securities only.

Type of SecuritiesEligibleLoan valueMinimum loanMaximum loan
Equity sharesIndividuals50% of the current value3,00,00020,00,000
Equity Mutual FundsIndividuals50% of the current value3,00,00020,00,000
BondsIndividuals80% of the current value3,00,00020,00,000
Debt Mutual FundsAll80% of the current value3,00,000No limit
InsuranceResident individual80% of the current value3,00,000No limit
Fixed DepositResident individual80% of the current value5,0005,00,00,000
Loan against securities criteria and eligibility chart

Note that loan value and amount may vary from bank to bank due to their internal policy, so please contact your bank for more information.

loan against securities process
loan against securities process

Loan against Securities Process

The finance against securities process is simple and easy. It is most likely similar to a gold loan or loan against property. We can directly apply online if we are existing customers of such a bank otherwise we can contact customer care for more detail. Almost every bank or NBFCs are willing to provide loans against the securities.

Generally, a nominal fee is charged as a processing fee. Accordingly, the bank will verify your application and other documents before the process. This process will take a few working days to activate your loan account and they will confirm the status.

Once confirmation is done, the bank will approve the withdrawal limit. We can utilize funds as & when it requires and accordingly we need to pay interest on such utilized funds only.

Loan against securities interest rate and charges

Interest in L.A.P. starts from as low as 9.5%. on the higher side, it may go up to 12.75% depending on the model. Further its the sole discretion of a lending institution to offer some discount or offer.

A processing fee may vary from bank to bank. Usually, it is around 0.15% to 2%. Some banks even charge a fixed processing fee, irrespective of the loan value.

Additionally, there are a few incidental charges also applicable. Please discuss with your bank & collect a copy of such charges list. Here we mention a few charges detail as follows: –

Standard charges & processing fee

  • Processing fee– usually from .15% to 2% on loan value. It may vary bank to bank.

Fore-closure charges

  • No fore-closure charges applicable on LAS.
  • A penal charges applicable on amount withdraw in excess of the allow limit. It may vary bank to bank.

Please note that all above charges or fees are also liable for GST, and which you need to pay additionally apart from basic fee or charges.

Important points to remember while apply for Loan against Securities

  1. All equity shares should be in dematerialized form only.
  2. For Demat Joint account holders, authorization of all joint holder is required for loan process. Some banks only allow loans for single account holder demat accounts.
  3. In case of loan against equity only, loan value will be considered on the basis of value of share shown on Demat account on previous working day.
  4.  At any point of time, any single company equity shares should not be more than 65% of your total portfolio size.
  5. Loan value is varying on what kind of Securities, we hold. For more detail, explanation give below: –

Equity shares- up to 50% of current market value as per last working day.

Mutual Funds- For equity mutual funds, up to 50%, and for debt mutual funds, up to 80%.

Insurance policies- Up to 80% of policy surrender value.

Non-convertible debenture- loan up to 70% on the face value of NCD.

Saving schemes- Gold deposit certificates, Kisan Vikas Patra, and National saving certificates, we can get 70% on current value.  

Documents required for Loan against securities

For loan against the securities, generally, banks or NBFCs required the following documents to process it: –

  • Loan against securities form (filled in)
  • Identity proof-Aadhar/Passport/Driving license/PAN
  • Address proof- Aadhar/Voter ID
  • Photograph-02
  • 3 Months bank statement with self-attested
  • Income Proof- Income tax return (last two years self-attested)
  • In case of Mutual fund- self attested Mutual fund statement
  • For equity shares- client master list of demat account
  • In case of Insurance-surrender value report

Please keep two sets of documents- photocopies for submission (self-attested) and the original document for verification.

Pre-closure or Fore-closure charges for Loan against securities

Pre-closure or fore-closure means to clear off your dues before the scheduled time. For this, you may contact your bank customer care representative and complete the pre-closure process. There is no pre-closure or fore-closure charges applicable on loan against the securities.


So, friends, this is a complete analysis of LAS, covering all important aspects which are important for you. If you like my effort or if you wish to know more about it, please do share your views in the comment box below.

Frequently Asked Questions

Q. Do I need a Demat account with same bank to take loan against the securities?

Ans. No, it is not necessary. You can avail loan against your securities maintained by any depository under NSDL and CDSL.

Q. How frequently does the bank evaluate my portfolio?

Ans. Generally, they review it on weekly basis but in case of a market fall sharply then they can review it on an interim basis.

Q. During loan tenure, in whose name the shares will be held?

Ans. Shares always remain in your name, you need not transfer them during loan tenure and can enjoy all benefits like dividends and bonuses, etc.

Q. What will be loan tenure for loans against the securities?

Ans. Loan tenure is for a year and needs to renew on an annual basis.

Q. Can I avail overdraft facility for all types of securities?

Ans. No, an Overdraft facility is available only in the case of shares or mutual funds but all other types of securities like RD, fixed deposit, tax-saving certificates, overdraft facility is not available.

Q. Do I need to provide any security or collateral?

Ans. No, you need not to provide any collateral except the securities held in your Demat, against that you apply for a loan.

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