When in need of urgent money, people generally mortgage their property to avail a loan. However, your property might have sentimental value and you might not want to put it even at the slightest of risks. Also, you loan requirement might not be as high to put your property for a mortgage.
There could be numerous factors that could be deterring you from availing a loan against property. One solution could be to avail a loan against shares (LAS). Let’s understand what is Loan against shares and why it could be a better choice for you as against loan against property.
Loan against shares
You can avail a LAS through banks, Non-Banking Financial Company (NBFC) or registered brokers. While availing a loan against shares, you sign an undertaking wherein you agree to pledge your shares for a value. In fact, you can avail a LAS against your bonds, mutual funds, Fixed maturity plans (FMP), insurance policies or Employee stock option plan (ESOP). Thus, you continue to enjoy all the rights of a shareholder over your shares like bonuses, right shares and dividend, while you get liquidity to tackle your financial needs.
The following points will help you understand why you can avail a LAS:
Withdraw as you wish
A loan against shares can be availed as an overdraft facility in your account. You can withdraw as much money as you want. Accordingly, the interest is charged only for the amount you have withdrawn from your account. The interest is calculated based on the period you have used the amount for. Thus, it is similar to selling your shares but better as you don’t sell your shares, but you just pay interest on the amount you borrow. In the long run, this interest could be minuscule as compared to the returns that these shares fetch you.
You can avail a LAS by fulfilling simple eligibility criteria. With lenders like Bajaj Finserv, there is the following 4 eligibility requirement which you must fulfil to avail a LAS with them:
- You must be an Indian resident
- You must be at least 21 years of age
- You must have a steady income as a salaried employee or a self-employed professional
- The securities that you pledge should be of a minimum value of Rs. 10 lakh.
Just like a loan against property, LAs is a secured loan. Thus, its approval process is faster and involves minimal documentation. For applying a LAS with Bajaj Finserv, you will need to submit your ID proof (that can be a copy of your PAN, Aadhaar card, or driving license), your passport size photograph, ownership documents of your securities and your Address proof.
Moreover, you can also avail the services of a relationship manager that is available to you 24*7 to assist you to apply for a loan against shares.
Nil part payments charges
One of the best features of a LAS is that you can repay your loan amount as per your convenience. There are no foreclosure or prepayment charges. Thus, you can repay the amount before the end of the tenor without paying any additional interest. Moreover, you can choose a flexible tenor which can be anywhere between 3 to 12 months.
Attractive interest rates
Loan against shares interest rate generally is based on market fluctuations, kind and liquidity of the shares you pledge. As you submit a collateral, lenders offer a lower rate of interest compared to a person or a business loan. You can avail a LAS with Bajaj Finserv on an interest rate starting from 9.5% to 12%.
LAS can be a good alternative for Loan against property. You can avail this loan for all the reasons stated above.