Tips to Qualify For Availing Loan Against Security

15 Feb 2023

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When funds are required, you tend to liquidate assets. Instead, go for a loan against your pledged securities as collateral to look after your immediate financial needs. You can take loans against shares, mutual funds, bonds, debentures and SGB that will fulfil your immediate cash obligations.

What Is Loan Against Securities?

Investors these days are expanding their investment portfolio by investing in shares and securities with traditional saving and investing options. These not only strengthen their net worth but also create avenues for quick short-term loans against shares. The advantage of a loan against security allows you to borrow the amount that you require on short notice.

Tips that qualify you for a loan against securities

Before you apply for a loan against these collaterals, it is smart to go through the tips we are sharing to ensure you qualify for the loan.

• State the purpose of the loan

Objectively state the purpose for which you require the loan so that the lender quickly understands and determines your intention for seeking the loan. This facility is available to meet contingencies needs only.

• Look for a high-value lender

The lending market is filled with many retailers offering attractive prices. While you look for high-value lenders, make sure you select the one that offers the best value in terms of price and security.

• Audit the shares and securities used as collateral

A list of pre-approved shares, securities and equity holdings are listed with banks. Check if your holding is eligible.

What is the loan against shares eligibility?

When applying for a loan against collaterals like shares and securities, ensure you fulfil the following criteria so that you can easily get your loan upon application.

  • You should be an Indian citizen
  • When applying for the loan your age should be over 21 and under 70 years.
  • You must be a salaried employee in either public or private sector. In the case of self-employed individuals, regular income proof needs to be provided.
  • Your CIBIL score should be a minimum of 701.
  • The financial asset used as collateral should have a good rating

Documents required

  • KYC, PAN Card, AADHAAR card
  • Bank account proof
  • Demat account proof
  • Demat/Mutual Fund holding statement
  • Income proof of both salaried and self-employed individuals

Credit underwriting formalities

Once the application is submitted, the lender will thoroughly review your application and the documents to evaluate creditworthiness. Your profile and collateral's financial security determining its rightful value are all audited against the current market performance.

Wrap Up!

The sanction rate on shares and securities is much higher. These loans are benefitted from the flexibility of multiple drawdowns and repayment all along the loan tenure. This is the reason why lenders readily agree to disburse loans against these trusted collaterals.

Also Read: What Is Loan Against Securities – A Complete Guide

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