Personal Loan

is Loan against shares A Good Idea?


Unforeseen needs can put you in urgent need of cash. In such a situation, you may think of selling your securities to obtain funds. However, you can pledge your securities and obtain a loan against shares to fund your needs. Read on to learn more about this loan.

What is Loan Against Shares?

Loans against shares are taken against financial assets like shares, mutual funds, or life insurance policies. The financial assets serve as collateral for the bank.

A loan secured by shares enables customers to make better use of their financial resources. It also stops people from selling their shares in a hurry during times of need.

The maximum loan amount they may guarantee with their shares depends on how many shares they own and which bank they are borrowing from.

How Can I Get a Loan Using My Shares as Collateral?

When clients pledge shares as collateral for a loan against stocks, the bank gives them access to an overdraft facility. The applicant is responsible for paying interest only on the withdrawal amount.


If you meet the following eligibility requirements, you may be eligible for a Loan Against Shares.

  1. Age: You should fall within the range of 21 and 70 years.
  2. Credit Score: Your credit score should be at least 700 according to CIBIL.
  3. Nationality: Indian nationals can apply for this loan.

Benefits of Taking a Loan Against Shares

  1. Easy access to high-value loans: For loan against shares of up to Rs. 10 crores, you can use your shares, mutual funds, FMPs, ESOPS, IPOS, and bonds as security.
  2. Lower Interest Rates: A loan secured by securities of any kind has a lower interest rate than the bulk of unsecured loans and credit cards. As a result, when applying for a loan, debtors may pledge the shares as security. Based on your stock profile, the interest rate on a loan against shares could be as low as 10.5%. You can thus meet your needs with the low-interest rates of loans against shares.
  3. Continuing returns and dividends: In the case of loans against securities, the units remain in the market, allowing you to reap the full benefits of your investment. The lender has no control over these payments, regardless of whether it is a dividend from preference shares or interest income from a bond. As long as you keep up with your repayment obligations, you can keep getting returns on your assets. 
  4. Simple processing: The eligibility for a loan against shares is not based on any documentation of income or creditworthiness. Given that they are secured loans, the lender bases all of the terms of the loan against shares, including the interest rate and tenure, solely on the stock list and its value. This makes the loan approval procedure easier. Additionally, you will receive the loan money in two or three days. As a result, many borrowers in need of immediate cash find loan against shares as a practical option.
  5. Quick funding for your urgent matters: Unexpected expenses arise that require immediate money. It can be difficult to arrange enough money during emergencies. Selling off your assets and investments could seem like a practical decision in such circumstances. However, instead of selling your stocks, you can apply for a loan against securities. These loans offer 24-hour approvals and 48-hour disbursements in order to receive immediate funds. You may meet your needs for personal and professional demands with a quick application and disbursal process.
  6. Improved ROI on your holdings: You’ve constructed your investment portfolio with a diversified mix of different assets in mind, with both short-term and long-term returns in mind. These investments have the potential to develop and produce large returns over time if left unattended.

Consider the situation where you sell your shares before they mature or when unfavourable market conditions may cause you to forfeit future gains. A loan against securities can help you in this situation. While your equity holding continues to get its fair share of market earnings and dividends, you can simply pledge your investments to obtain money.

  1. Borrow against a variety of securities: Even though your investment portfolio is diversified, you can still opt to use only particular stocks as collateral. For instance, you wouldn’t want to pledge an investment like an FD for a loan if it provides the monthly returns you want to pay for household costs.

You could instead decide to pledge your bonds or even shares. Any security, including fixed-term savings, mutual funds, or insurance, may be used as collateral for this loan as long as its minimum value i Rs. 10 lakh.

  1. Convenient terms for repayment: You can obtain a loan against your valuable securities and equity holdings with simple repayment terms. Lenders give you the option to foreclose on the property or make partial loan prepayments. Make sure you select the appropriate lender and select the securities you want to pledge.


To conclude, pledging your securites as a collateral for loan against shares is definitely a good idea based on the benefits mentioned above. The process of applying for a loan against shares is relatively easy. It also comes with a lower rate of interest as it is a secured loan. Another amazing benefit of taking a loan against stocks is that you continue to receive returns and dividends on shares as they are still held by you.

For any finance-related queries, feel free to visit Piramal Finance for expert guidance. They offer a wide range of loans to help you meet your urgent needs. They have many articles and blogs on a range of topics to help improve your finance skills.