In today’s world where wishlists are ever-increasing and inflation is always roaring high, loans are essential for fulfilling various financial needs. Whether it’s for starting a business, purchasing a property, or meeting personal expenses, loans help individuals achieve their goals while keeping their finances smooth. However, traditional loans come with stringent eligibility criteria and high-interest rates, making it challenging for some people to qualify. This is where a loan against securities comes into the picture. It’s an excellent option for those who have investments in securities and are in need of funds. In this article, we will discuss how to secure a loan against securities with the best terms and conditions.
A loan against securities is a type of loan that allows borrowers to pledge their securities like shares, bonds, mutual funds, or insurance policies as collateral to avail of the loan. The loan amount sanctioned is usually a percentage of the market value of the securities. Since these securities are pledged as collateral, the interest rates on such loans are relatively lower than traditional loans. Additionally, the loan approval process is relatively quick and straightforward.
Here are some essential tips for securing the best loan against securities at the most appropriate terms and conditions:
- Choose a reliable lender: The first step in securing the best loan against securities is to choose a trustworthy lender. Look for a lender that has a good reputation in the market and offers competitive interest rates with smooth and convenient processing.
- Determine the loan amount: Before approaching the lender, calculate the loan amount you require. This will help you determine the securities you need to pledge as collateral and the loan amount you can expect to receive. In cases where you need a bigger loan amount, you can reach out to the experts like Rurash Financials who facilitate loans against securities through more than one trusted lenders in the range of 10 lacs to 100 crores.
- Understand the terms and conditions: Once you have shortlisted the lender, make sure you understand the loan terms and conditions. Carefully read the loan agreement and clarify any doubts with the lender before signing the agreement.
- Compare interest rates: Different lenders offer different interest rates for loans against securities. Compare the interest rates offered by various lenders and choose the one that offers the most competitive rates. If you go through an expert financial services distributor like Rurash Financials, the designated relationship manager will do the needful for you.
- Choose the right securities: The loan amount sanctioned is usually a percentage of the market value of the securities pledged as collateral. Choose securities that have a high market value to receive a higher loan amount. However, keep in mind that the pledged securities may be sold in case of default.
- Loan Tenure: Loan tenure is an essential aspect to consider when taking a loan against securities. It’s important to choose a tenure that matches your repayment capacity. A longer tenure may reduce the EMI but will lead to a higher interest payout. On the other hand, a shorter tenure may increase the EMI but will lead to a lower interest payout.
- Prepayment and Foreclosure Charges: It’s essential to check the prepayment and foreclosure charges before taking a loan against securities. Some lenders may charge a penalty for prepayment or foreclosure of the loan. It’s important to choose a lender that offers a lower or no prepayment and foreclosure charges.
- Documentation: Documentation is an essential aspect when applying for a loan against securities. Make sure to have all the necessary documents like ID proof, address proof, income proof, and securities’ ownership proof. Any incomplete or incorrect documentation may lead to a delay in loan approval.
Now that we have discussed how to secure the best loan against securities terms and conditions let’s look at the different types of securities that can be used.
- Shares: Shares of publicly listed companies can be pledged as collateral for a loan against securities. The loan amount sanctioned is usually a percentage of the market value of the shares.
- Mutual Funds: Mutual funds are an excellent option for those who want to invest in the stock market but do not have the expertise. They can also be pledged as collateral for a loan against securities.
- Insurance Policies: Insurance policies like endowment plans or ULIPs can also be used as collateral for a loan against securities. The loan amount sanctioned is usually a percentage of the surrender value of the policy.
- Fixed Income Investments: Bonds and FDs issued by companies or government bodies can also be pledged as collateral for a loan against securities. The loan amount sanctioned is usually a percentage of the market value of the bonds.
In conclusion, a loan against securities is an excellent option for those who have securities but are in need of money. It’s important to choose a reliable lender, understand the terms and conditions, and choose the right securities to secure the best loan against securities terms and conditions. Additionally, the different types of securities that can be used for loan against securities include shares, mutual funds, insurance policies, fds and bonds. Before pledging any securities, make sure to read the loan agreement carefully and clarify any doubts with the lender.