Loans against securities (LAS) allow you to borrow money by pledging your investments as collateral.
Types of securities accepted:
- Although the exact securities accepted may vary by lender, common options include:
- Equity shares: Shares of listed companies.
- Mutual funds: Units of equity, debt or hybrid funds.
- Bonds: Corporate and government bonds.
- Debentures: Corporate debt instruments.
- Life insurance policies: Certain policies with surrender value.
How the loan amount is determined:
- The loan amount is typically a percentage of the market value of your pledged securities. This percentage, known as the loan-to-value (LTV) ratio, varies depending on the lender and the type of security.
Benefits of LAS:
- Investment protection: You can retain ownership of your investment while accessing funds.
- Quick disbursement: Funds are usually disbursed quickly.
- Competitive interest rates: Often lower than unsecured loans.
- Tax benefits: Interest paid on the loan may be tax-deductible in some cases.
