What is a Loan against securities?
Loan against securities are loans that you can get by pledging your securities with the bank. As these loans are secured, the rate of interest is not that high and can vary between 9-12% depending on the underlying security. Loan against security does not have any pre-payment charges. Loan tenure can be up to 1 year with an option to renew annually. They generally have a small processing fee starting from 0.15% of the loan amount. Loan against security includes securities like shares, mutual funds, PPF and fixed deposit.

1)Loan against share:

Loan against shares means borrowing funds from the bank, where shares are pledged by the owner as a security against the funds obtained. In this case, the borrower continues to be the owner of the shares and enjoys ownership benefits like dividends, bonus and rights but cannot sell the shares unless and until he pays off the loan. Loan against shares is offered against listed securities and the loan amount can go up to Rs 20 Lakhs, however, if you are holding shares in physical form you can only get a loan of 10 lakhs.
2) Loan against mutual funds
Mutual funds in India has been growing tremendously and a lot of people have started investing money in mutual funds. Unfortunately, most of us are not aware that we can also avail loans by pledging our mutual funds. Opting for loan against mutual funds doesn’t become a cause of hurdle for your SIP Investments so you don’t need to sell them. Loan against mutual fund is a secured loan where you pledge your mutual funds units, you cannot sell them until you pay your loan amount back to the bank. Under any circumstance if you are not able to pay your loan, the mutual fund company redeems your units for loan repayment. Individual should be above the age of 18 to avail loan against mutual fund.
3) Loan against fixed deposit
If there is an urgent need of cash and you need money, you can take a loan against fixed deposit. Loan against fixed deposit can only be availed from the bank at which the deposit is made. Most banks allow loans up to 90% of the value of the fixed deposit. You cannot close your fixed deposit prematurely until loan is paid. Loan against fixed deposit is generally 0.5 – 2% above the interest rate on the deposit.
4) Loan against PPF
Loan against PPF is another method through which you can borrow money to meet your urgent expenses. Loan against PPF can be availed at very low interest rates. The tenure of the PPF loan is generally 36 months.