Personal Loan

Loan Against Stock: All You Need to Know


In India, a loan against a stock is defined as a loan given to an individual by a financial institution using shares or stocks as collateral. The loan amount is determined by the value of the shares pledged. Several institutions offer loans against shares, including banks, NBFCs, and stockbroking firms. The loan can be used for various purposes, such as business expansion, personal needs, or working capital requirements. It is a quick and convenient way to raise funds, and the interest rate is usually lower than that of personal loans. Here we will discuss everything you need to know about loans against shares, including how they work, their benefits, etc.

What is a Loan Against Stock?

The definition of a loan against stocks is when an individual borrows money from a financial institution by using securities, such as shares or bonds, as collateral. The loan amount is based on the value of the securities pledged. The lender holds the collateral until the loan is repaid in full. On the one hand, the borrower gets much-needed financial assistance, while on the other, the lender has a low-risk investment. When the loan is repaid, the securities are returned to the borrower. The interest rate on these types of loans is usually lower than that of personal loans. The best part is that you can use the loan amount for any purpose, as there are no restrictions imposed by the lender.

How a Loan Against Stock Works

The LAS system is simple. You pledge your stocks with the lender, who, in turn, offers you a loan amounting to a certain percentage of the value of your shares. Most of the time, the institution opens a current account in the borrower’s name. The rate of interest is calculated based on the amount withdrawn by you during the period when it was used.

This facility can be availed of for a short-term period or on an ongoing basis, depending on your requirements. In the former case, you can use it to meet emergency expenses like medical bills or travel costs. On the other hand, if you require a regular inflow of funds, you can opt for the latter.

What are the Features of a Loan Against Stock?

Loans against shares are a popular mode of borrowing among investors as they come with several features. Some of them are mentioned below:

  • The loan value is a predefined percentage of the market value for shares held to account.
  • Eligible securities for loan against shares include ESOPs, equity shares, preference shares, and debentures.
  • When taking out a loan against your Demat shares, the loan against share interest rate is generally 12–18% per year and is cheaper than personal loans.
  • You can pledge your Demat shares to avail of a loan amounting to Rs. 20 lakhs.
  • You don’t need a guarantor to avail of a loan against shares. As security, banks or NBFCs ask for a pledge of shares.

Benefits of Loan Against Stock

The benefits of a loan against stock are many, and it can be a great way to get quick access to cash. Here are some of the main benefits:

  • You can use the loan for any purpose.
  • The loan against share interest rate is usually lower than that of other types of loans.
  • There are no restrictions on how you use the loan.
  • The loan is easy to obtain.
  • You can get the loan quickly.
  • The loan can be used as collateral for other loans.
  • The loan can be paid back over a longer period.
  • You can get a tax deduction on the interest paid on the loan.
  • The loan can be used to buy stock or invest in a business.
  • You can get a loan against multiple stocks.

What are the Eligibility Criteria for Loan Against Stock?

There are several eligibility criteria for taking a loan against shares, which are as follows:

  • Age Criteria: The applicant must be at least 18 years old. You can avail of this facility until the age of 65.
  • Resident Criteria: You must be a resident of India to apply for this loan.
  • Minimum Stock Value: The shares pledged by you should have a minimum value of Rs. 4 lakh.
  • Documents Required: You have to submit KYC documents, such as identity proof, proof of documents, proof of stocks, address proof, and the latest photographs.

These are some of the documents required for taking a loan against shares.

Documents Required for Loan Against Security

The documents required for a loan against shares are as follows:

  • Identity Proof: Passport, PAN card, Aadhaar card, driving license, voter’s ID card
  • Address Proof: Passport, utility bills such as electricity, water, and gas bills; ration card.
  • Proof of Income: Latest salary slip, bank statements for the last 3 months, Form 16
  • Proof of Stock: Latest stock holding statement
  • Photographs: Passport-sized photographs

How to Apply for a Loan Against Stocks?

Almost every bank in India offers loans against shares. However, the process of applying for this loan is different for every bank. In some banks, you can apply for this loan online; in others, you must visit the branch and submit the required documents. Banks also have different eligibility criteria and rates of interest. Hence, you should compare the offers of different banks before applying for this loan.

The steps to apply for this loan are as follows:

  • Visit the website of the lender and fill out the application form with personal and financial details.
  • Submit the form along with the documents required.
  • The lender will verify your documents and, if satisfied, will approve the loan.
  • The loan amount will be credited to your account within a few days.

These are the steps involved in applying for a loan against shares.


Anyone who has shares in their Demat account can avail of a loan against those shares. The loan amount will depend on the value of your shares. The loan against share interest rate is generally lower than that of other types of loans. You can use the loan for any purpose. The repayment period is also flexible. Parimal Finance offers loans against shares at attractive interest rates and with a simple application process. So, if you are looking for a loan against stocks, then apply with us today!