Things to know before taking loan against stocks, mutual funds – About Your Online Magazine

NEW DELHI: Securities lending is not among the fastest, but it is among those with the lowest interest rate. Lenders offer securities loans (LAS) at two or three percentage points higher than home loan rates.

A borrower may consider the option instead of liquidating the investments. Your investments will continue to grow as long as they are secured with a lender. You will also continue to receive dividends, bonuses, etc., for the duration of the loan.

You can pledge bonds such as stocks, mutual or equity funds, insurance policies, and money-raising bonds.

Lenders generally have a list of bonds they are willing to accept, which is available on their websites. For example, in the case of stocks, a bank can accept only the 50 or 100 largest companies. In the case of mutual funds and life insurance policies, they could have a specific list of companies.

In the case of shares, a lender will offer 50-60% of the securities’ value as a loan. It may be higher in the case of debt funds or bonds. In addition, lenders may request additional securities if the value of the securities falls during the term of the loan.

Beware of LAS charges. In addition to processing charges, a lender may levy stamp duty on the loan agreement, lien creation fee, and so on.

Loans against securities.

View full image

Loans against securities.

Some lenders, such as HDFC Bank and Yes Bank, offer online loans for stocks and mutual funds. The process is completely paperless.

Keep in mind that these are short-term loans, usually with a term of up to 36 months. Some lenders offer a flexible repayment option, where borrowers can pay interest every month and the principal at the end of the loan term.

(Do you have a personal finance consultation? Send your questions to and get the answer from industry experts.)

Subscribe to Mint Newsletters

* Enter a valid email address

* Thank you for subscribing to our newsletter.

Paula Fonseca