How does Loan against Shares help you?
Traditionally, Indians have pledged gold and property in a bid to raise capital to fulfil personal or professional financial needs. These two asset classes can also be sold quickly to raise monies in a relatively short space of time.
However, in recent times, other loan products have become increasingly popular with both individuals and companies. These include loan against property, term loan, working capital loan, etc. One such lending solution is Loan Against Shares or Securities
What are loans against shares?
Individuals or businesses holding their own shares can liquidate them quite quickly to raise a substantial amount of capital. This is a useful alternative for those who are not too keen on pledging their property to get a loan. The lending institution offers the loan basis the quality of the owned shares. This credit is known as 'Loan Against Shares' (LAS).
How does Loan Against Shares benefit you?
Loan Against Shares is essentially a term loan. It is granted by lending institutions basis the equity shares held by an individual or company.
It is more cost-effective and is disbursed quite quickly after analysing the shares. The stipulation for getting this loan is that the shares must be of a high grade and on the lending institution's list of approved shares. Shares outside this list are not considered for loan.
The shares are merely pledged to the lending institution for the loan tenure. The applicant does not sell the shares to the lender, nor are the bonuses and other accruements on them forfeited or diverted to the lending institution in the loan period. The lending institution does not assume ownership of the shares in any form. However, these may be attached by the lender in case there is a default in repayment.
This type of loan largely benefits businesses that are looking to expand their size and scope of operations, and individuals who may require money for personal reasons.
How to get Loan Against Shares?
You can get this loan online by entering your personal or company details on the insurer's web portal and applying for the loan online. The lending institution then arranges a meeting to evaluate the shares and explain the product's various functionalities. If you are convinced about the loan's efficacy and have the list of approved shares, you can proceed to make the loan application.
The lender will then ask you to demat your shares before proceeding further with the application. They will also guide you on the necessary paperwork and supporting documents you must furnish to finish the application process.