You can face unforeseen financial demands at any time, and at that time having funds ready is very helpful. But what if you don’t have savings upfront? This is where you can avail a Loan Against Securities (LAS) from ICICI Bank. In this type of loan, you can put your investments as collateral without losing ownership.
In this post, we will go over the key benefits of these loans and things to know when considering this type of loan.
Benefits of Getting Funds from a Loan Against Securities
The following are the advantages of availing a Loan Against Shares:
- Low Interest Rates
The reduced interest rate is a key advantage of obtaining LAS. It generally offers lower interest rates as compared to unsecured loans or Credit Cards. Since they are backed by your investments, it is less risky for lenders and provides attractive interest rates.
- No Need to Sell Your Investments
The best part about taking LAS is that you can access cash without selling your investments. This allows you to meet financial needs while continuing to benefit from potential market growth.
- Fast and Simple Handling
Getting a loan against your securities is quick and hassle-free, as the loan is secured by the value of your holdings, and doesn’t need lots of paperwork like proof of income or a good credit score. After you submit your application and your securities are evaluated for their worthiness as collateral, the loan request process starts immediately, with the disbursal of funds taking place within 1 or 2 days. This makes an ideal choice for those in need of financial assistance and looking to avoid the delays associated with lengthy approval procedures.
- No Impact on Credit Score
While basic credit checks are conducted to assess repayment behavior and past loan history, a Loan Against Securities does not heavily rely on credit checks. You can secure a loan against securities even with a lower credit score if you have adequate investments to pledge.
Things to Know About Loans Against Securities?
- Selecting the Right Lender
Different lenders offer varying terms for Loans Against Securities, including interest rates, eligibility criteria, and repayment options. Comparing lenders helps secure the most favourable terms. If you already have a Demat account with a financial institution, applying with the same lender can simplify and speed up the process.
- Familiarise Yourself With the Eligibility Needed
Make sure to review the lender’s eligibility requirements before you submit your application.
Criteria to consider include:-
- You must be minimum 18 years old to apply for the loan.
- Individuals, Hindu Undivided Families (HUFs), companies, partnerships, sole proprietors, trusts, and societies can apply for LAS based on the type of security.
- Make sure to have your identification documents, such as an Aadhaar card and address proof, along with income proof, handy.
- Retain Ownership and Rewards
Pledging your securities for a loan allows you to access funds without losing ownership. You continue to receive dividends, bonuses, and potential share allotments while benefiting from market appreciation. This enables you to meet financial needs without compromising your long-term investment goals.
- Stay Informed About Any Costs and Charges
In addition to the interest rates involved in LAS, there might be certain added fees to consider such as processing fees or account closure charges among others. Some financial institutions may even offer the benefit of no prepayment penalties allowing you to settle your loan earlier without any costs involved. Being aware of these fees enables planning leading to avoiding any surprising expenses later on.
- Loan Amount and Interest Rates
The loan amount you can avail of depends on the market value and type of pledged security. Leading banks like ICICI Bank may offer 50% to 80% of the market value of the security, depending on the security type. It’s worth noting that the interest rates for these loans are lower compared to unsecured loans, making them a more budget-friendly choice. Rates may differ from one lender to another, so it’s advisable to compare offers to find the one.
- Plan Your Repayment
Loans Against Securities provide repayment options that cater to your needs and preferences.LAS is offered as an overdraft facility which charges interest only on the amount you utilise and the time you utilise it for. You can customise the repayment plan as per your financial standing and budget. It means you are required to pay only the interest on the due date, while the principal repayment can be made at your convenience or when you have surplus funds. This allows for flexibility in managing your finances and avoiding unnecessary fees or penalties with proper planning of your repayments.
Conclusion
LAS is one smart financial method that allows you to access the value of your investments without having to sell them. Your banks offer these loans, where you can take out a loan using your securities as collateral to the lender. It allows your assets to continue growing and gives you access to money when you need it, all while offering benefits like flexible repayment terms and attractive interest rates.
