What is a Share Loan? All your questions, answered
When applying for a loan, the first priority is definitely the rate of interest. While in other loans, the rate of interest is fixed irrespective of the amount, in case of loan against shares, interest rates are calculated depending on the amount. But because the loan is procured against your shares, the amount of loan that you can get is about 50-70% of the value of shares that you pledge.
When you take a loan against shares, you don’t have to dissolve your shares for availing the loan. So it’s perfect during emergencies and you’ll still be entertained with the dividends and bonus shares that you would have normally gotten. Loan against shares in India have been gaining popularity over some time now and here are the advantages they offer:
Rate of Interest
The advantage of loan against shares is that you will be charged interest only on the amount you withdraw from the account and for the span of time the fund is utilised. This feature makes loan against shares the ideal choice for people looking to save on interest payments.
Ease of Access
Another advantage associated with loans against shares is that you can apply and get your application approved easily. For instance, NBFCs like Bajaj Finserv offer Loan against Shares with online facility where you can get an instant approval on your loan. All you need to do is fill the application from wherever you are and get an approval instantly.
As per the availability of cash, you can choose to prepay your loan at any interval without any extra charges. Bajaj Finserv offers part prepayment facility which allows you to payback your loan quickly and save money on interest payment. During the tenor of your loan which is generally 12 months you can make part payments of any amount that you wish.
Now that you know more about loan against shares, here is what you should know about the process:
How do they Work?
More often than not, banks change the shares against which loans can be taken at regular intervals. This is done to ensure the stability and liquidity of shares which can be pledged. If you have shares in physical form, most of the banks require that you convert them into dematerialised form and then only you can apply for a loan. Dematerialising physical shares is not difficult and some banks may provide loan against shares in physical form too.
Eligibility for Loan Against Shares
Most banks offer loans against shares with some basic eligibility criteria, for example, you should be a salaried individual with regular income, and minimum age requirement of 25 years. Also the shares that you pledge should have a minimum value of 25 lacs. All the required documents should also be kept ready for submission.
Bajaj Finserv, one of the leading financiers, offers Loan Against Shares with features like security swapping and dedicated relationship manager. Apply online for loan against shares here.