How do Loan against Shares function

Over a period of time through timely investments, many investors build portfolios of bonds, deposits, equity shares and mutual funds. But there may arise a situation where you might need some cash for an emergency. In such a case the investor is faced with a dilemma of whether to raise funds by liquidating the hard-acquired investment portfolio or raise funds through self-means.

This dilemma is put to rest through a facility known as Loan against Securities (LAS). This service is being offered by banks and non-banking finance companies. This can serve as a good alternative to get the desired funds.

Banks provide a listing of securities that are approved and against those securities are willing to offer a loan. The value of securities such as loan against mutual funds can vary from 50% and go up to 90% for bank deposits. Once the credit limit is being sanctioned according to the collaterals being provided, the investor can freely put out the cash as per the limit stated. The amount can be withdrawn from ATM or internet banking facilities.

The interest rate on LAS is low. In fact, the LAS interest rates are far below credit cards and personal loans. The interest is charged on a month on month basis and is primarily based on the basis of the outstanding balance in the overdraft account. On account for failure to repay the debt, the lender can liquidate the shares and release the amount.

It should be noted that the loan against shares is usually offered to individuals who are residing in India. For people of another status such as HUF, NRI or other entities should check with their respective banks for the procedure of availing this scheme.

One should note that no LAS shall be done against: partly paid up shares, lock in shares, physical shares and such other criteria. JMFL is one of the institutes who deal with LAS. They have successfully managed to guide many investors through the procedures of acquiring funds. The firm of experts ensure that you get the best possible value for your collaterals. Do visit their website and see the various offerings that they have at your disposal.

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