What is Loan against Securities?

In times of financial emergencies, selling shares or mutual funds might seem like a quick fix, but it can lead to long-term consequences, including the potential loss of future returns. An alternative solution is a loan against securities (LAS), which allows you to raise funds by pledging your securities—such as shares, mutual funds, or life insurance policies—without having to sell them. This detailed guide explains the concept, functionality, and benefits of LAS, with a focus on HDFC Bank’s innovative Digital LAS product.

A loan against securities is a financial product where you pledge your investments, such as shares, mutual funds, or life insurance policies, as collateral to secure a loan from a bank. This type of loan provides liquidity without the need to liquidate your investments, allowing you to address immediate financial needs while retaining your assets.

1. Collateral and Loan Amount: To obtain a loan against securities, you deposit your securities with the bank, which then assesses their value to determine the loan amount you are eligible for. The loan amount is typically a percentage of the market value of the pledged securities.
2. Overdraft Facility: Loans against securities are usually provided as an overdraft facility. This means that once your securities are pledged, you are granted an overdraft limit from which you can draw funds as needed. You only pay interest on the amount you withdraw and for the duration it is outstanding.
3. Interest Calculation: For instance, if you are eligible for a loan of Rs 2 lakhs and withdraw Rs 50,000, you will be charged interest only on the Rs 50,000 you utilize, and only for the period it remains drawn. If you return the Rs 50,000 within a month, interest will be calculated based on that one-month period.

HDFC Bank offers a revolutionary product known as Digital LAS, which simplifies and accelerates the process of obtaining a loan against securities. This digital solution allows you to secure a loan in less than 3 minutes through a completely online process, minimizing the need for physical paperwork and in-person visits.

1. Login: Access HDFC Bank’s NetBanking platform and log in to your account.
2. Pledge Shares: Select the shares or securities you wish to pledge.
3. OTP Verification: Accept the loan agreement through a one-time password (OTP) sent to your registered mobile number.
4. Pledge Confirmation: Complete the process by pledging your shares with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) online, confirmed via OTP.

1. Instant Disbursal: Enjoy immediate disbursal of funds when applying through NetBanking, facilitating quick access to cash.
2. Interest on Utilized Amount: Pay interest only on the amount you use, not the entire sanctioned limit.
3. Low Interest Rates: Benefit from competitive interest rates and minimal processing charges.
4. Flexible Loan Limits: Set your own loan limits, ranging from a minimum of Rs 1 lakh to a maximum of Rs 20 lakh.
5. Document-Free Process: No need to submit physical documents, as the process is fully digital.
6. Flexibility with Securities: Choose which shares or mutual funds to pledge and adjust them as needed in the future.
7. No Prepayment Penalty: Repay the loan without incurring any prepayment penalties.
8. High Loan-to-Collateral Value: Obtain a high loan amount relative to the value of the pledged securities.

A loan against securities offers a practical and efficient solution for obtaining funds during financial emergencies without disrupting your investment portfolio. With HDFC Bank’s Digital LAS, you can benefit from a fast, paperless process and enjoy various advantages including low interest rates and flexible loan terms. Whether you need immediate liquidity or wish to retain your investments, LAS provides a viable alternative to selling your assets.

Looking to apply for loan against shares? Click here

* Terms & conditions apply. Loan disbursal at sole discretion of HDFC Bank Ltd