Personal Loan

Things to Know About Loans Against Shares and Securities


Finding a way to abandon your stock and sell it anyway? Then why not invest in them rather than just selling them for pennies? Yes, we are talking about loans against shares which you should think about giving a shot. 

In this article, we are going to discuss getting a loan against securities, the benefits of having one, the eligibility criteria, and how to apply for this loan online. 

What is a loan against securities, and why is it taken? 

So, a loan against securities is a type of loan in which you borrow money from the lender by using your shares, mutual funds, or other insurance policies as collateral. The amount of money that the banks let you borrow depends on the value of your shares. You can still withdraw that money from the account and use it to pay your debt to the banks. 

Assume you have 5 lakh rupees in shares that you used as collateral for your loan. Now, if you withdraw 1 lakh rupees from your shares, you only have to pay the interest on 1 lakh, not on the entire amount. 

It can be a very good initiative for you if you are looking for an emergency fund but have nothing except your shares, which you want to dispose of anyway. As a result, taking out a loan against shares allows you to invest the loan amount in the venture of your choice while also paying your installments.

What are some of the benefits of taking a loan against securities? 

  • Quick disbursal:

If you apply for a loan against shares, you can get a quick disbursal of money within one to two days. Especially, if you apply through net banking, you can even reduce the disbursal time to half. 

  • Interest only on the used amount:

This means you only pay interest for the money you withdraw out of the total value of the shares. In your shares, if you have 2 lakh rupees and you withdraw 30 thousand rupees, then you have to pay the interest for just those 30 thousand rupees. 

  • Low-interest rate:

The loans you take against your shares are often charged at a low rate of interest. Banks see your shares as good collateral and charge you low-interest rates. If you are good at negotiating, then the interest rate might even get lower. 

  • Zero to minimal processing charges:

Banks often don’t charge you processing fees, and even if they do for the loan you take against your security, it is almost negligible or so little that it won’t hurt your pocket. 

  • Flexible loan limits:

Different banks have different loan limits, but the best thing is that they give you flexible options for a loan against shares. You can tailor your loan amount according to your requirements. Most often, you can apply for a loan in the range of 1 lakh rupees to 20 lakhs, which varies from bank to bank and depends on your credentials. 

  • No documentation requirement:

This is another advantage of taking out a loan against securities, unlike other types of loans. You don’t have to show any of your documents while applying for a loan, which is against your security. In some cases, banks might ask for your legal documents to ensure certain things, but it isn’t a general phenomenon. 

  • No penalties for prepayment:

Unlike in other types of loans where you have prepayment penalties, you are not penalized for taking a loan against securities. If you have your installment ready before the proposed date, you can simply go and pay without worrying about any charges. 

Important things to keep in mind about loans against shares and securities include:

  1. The time is always not flexible:

Though these types of loans seem appealing, there is always a setback to tenure. Some banks provide a maximum of 3 years to repay the loan amount. These types of loans are short-term in nature, and you have to think about this before you apply for them. 

  1. Make yourself aware of other types of extra charges:

Though there are zero to minimal processing fees, there could be other types of fees that you are not aware of. So, while applying for a loan against shares, make sure you ask about fees for stamp duty on the loan amount, pledge creation charges, etc. 

3. Not everyone who has shares goes on the list:

Not everyone who has shares and securities is sanctioned by the banks; rather, banks allow those who have shares that are potentially doing well in the market. Banks often prefer the top 100 companies that are doing well in stocks, mutual funds, etc. for loans against shares. For individuals, the rules are not that strict, and the eligibility is pretty decent. 

What is the eligibility to get loans against shares and securities? 

There are very few requirements to be eligible to apply for a loan against securities. First, you should be an Indian resident who has reached at least 18 years of age. 

And second, you must have a minimum security value, which differs from bank to bank. An amount of about Rs. 4 lakh is considered the benchmark for applying for a loan against shares. 


If you just want to get rid of your shares and sell them for a lower price for an emergency, you should rather use that money as collateral to get a loan against shares. That will help you to cover your expenses, and at the same time, you can easily repay through instalments. 

If you want to know more about loans, different investment schemes, and finance, you should consider visiting the official page of Piramal Finance. They have decent services and highly engaging content on these topics on their website.