Top Benefits of Taking a Loan Against Shares

When you require funds without wanting to sell your investments, then opting for a loan against your shares could be the choice for you. A loan against shares enables you to utilise your investments without having to sell them off providing a wise alternative. Banks such as ICICI Bank provide opportunities for loans secured by shares as an overdraft facility, allowing individuals to obtain cash by leveraging their stock holdings. This post will talk about the key advantages of opting for a loan secured against shares, including its features and application process, to help you determine if this could be a right choice for you.

Advantages of Opting for a Loan Backed by Shares

Here are the benefits of the Loan Against Shares:

Lower Interest Rates

Borrowing a loan against shares comes with an advantage in the form of low interest rates, when compared to other unsecured loans like personal loans or credit card loans. Lenders like ICICI Bank tend to provide attractive interest rates on secured loans since they are backed up by your shares. It can lead to cost savings on interest payments and make borrowing money more cost effective in the long run.

No Need to Sell Investments

When you borrow a Loan Against Shares and don't sell your investments outright, you are keeping them in your portfolio. This allows you to retain ownership of the shares and potentially profit from any increases in their value or dividends they may offer over time while also putting them up as security for the borrowed funds.

Quick and Easy Processing

Loans secured by shares are usually approved more quickly than other types of loans because you offer shares as security for the loan amount needed. Hence, the approval process is easier and involves fewer paperwork requirements. Leading banks like ICICI Bank, offer this loan as an overdraft facility so you can access the funds from the account anytime within the approved limit. This option is suitable for those in urgent need of financial assistance.

Options in Payment Plans

Several financial institutions like ICICI Bank provide flexible repayment choices for loans secured by shares assets like stocks or securities holdings. For example, you can select an overdraft agreement where you borrow the amount needed and pay interest on that sum used. This adaptability enables you to pick a repayment strategy that best fits your circumstances.

Continued Returns on Investments

Although your stocks serve as security for the loan you have taken out against them, you still receive dividends, bonuses or any other perks from your investments. This allows your investment portfolio to generate returns for you while you utilise the loan for requirements creating a mutually beneficial scenario.

Features of Loan Backed by Shares

The key features of Loan against shares are:

Collateral-Based Loan

A loan against shares is backed by the shares or mutual funds that you possess in your portfolio. Banks usually grant loans based on a percentage of the worth of your securities. ICICI Bank is one example which offers a loan of up to 50% of the value of eligible shares.

Loan Limit Based on Market Value

The loan amount you can borrow depends on how your shares are worth in the market at that time. If your shares increase in value over time, so does your borrowing capacity. Conversely, if the value of your shares goes down considerably, you might have to offer additional security or pay off part of the loan to maintain the required loan to value ratio.

No Income Proof Required

Since your shares serve as security for the loan, lenders usually do not ask for proof of income or credit scores, which can be beneficial for people without a steady income but who possess an investment portfolio.

Simple to Renew

Loan backed by shares frequently include an easy renewal feature that lets you prolong the loan duration as long as your collateral stays adequate. This feature offers flexibility for borrowing needs.

How to Apply for a Loan Against Shares?

Getting a Loan Against Shares is quite simple these days with banks such as ICICI Bank to assist you through the process. Here are the key steps to apply for the loan-

Select The Bank Option

Explore banks that provide loan backed by shares and assess their interest rates and terms to find the deal that meet your needs. ICICI Bank stands out as a top choice known for its appealing loan against shares options, which feature competitive interest rates and adaptable repayment conditions.

Verify If You Qualify

Before applying for a loan secured by your shares, ensure you meet the bank’s criteria which often includes having a demat account with the bank to pledge your shares and holding approved securities that the bank considers as collateral.

You can now easily apply for a loan against shares online through your bank’s Net banking or mobile banking application. Here are the steps for both:

Apply through Internet Banking

1. Log in to your Internet Banking
2. Click on ‘Cards and Loans’ then go to ‘Loans’ and select ‘Loan Against Shares’
3. Select your Shares for pledging
4. Provide FATCA details and accept the Terms & Conditions
5. Access funds through your new Overdraft Account

Apply through mobile applications like the iMobile app:

1. Log in to the iMobile app
2. Go to Pre-approved Loans/Offers and select ‘Loan Against Shares’
3. Select your shares for pledging
4. Provide FATCA details and accept the Terms & Conditions
5. Access funds through your new Overdraft Account

Generally, this procedure is completed within a few minutes, offering a quick and effective method to acquire funds.

Conclusion

Getting a loan against shares can be a great option for people looking for cash without having to sell their investments outright. This method comes with advantages such as attractive interest rates and flexible repayment plans while still allowing you to benefit from your investment returns.

Leading banks like ICICI Bank provide loans against shares as an overdraft, making it a convenient choice for borrowers who need quick access to funds. Before deciding to borrow against your funds or shares, make sure you thoroughly comprehend the terms and conditions.