Top Benefits Of Loan Against Securities

Top Benefits Of Loan Against Securities

A loan against securities is not a loan that people commonly opt for. This can be due to borrowers not knowing of its benefits. This article sheds light on the top benefits of loans against securities. 

In times of monetary needs, people often resort to selling their assets. But this can lead to potential value additions to that asset in the future. To avoid such a situation, taking a loan against your assets instead of liquidating them is a much wiser decision as you will still reap the benefits of the assets, but they will be pledged as collateral for the loan amount. 

Apart from this, there are multiple reasons why a loan against securities (LAS) can be a good option to cover your financial woes. The following are some top benefits of it. 

Benefits of Loan Against Securities

  • Straightforward Procedure

An LAS follows a very straightforward procedure and gives borrowers room to pledge different forms of collateral. Borrowers need to complete a simple form and then decide what kind of security they would like to set up as collateral. These securities include: 

  1. Shares 
  2. Mutual Funds 
  3. FMPs
  4. IPOs
  5. ESOPs
  6. Bonds

Once you have done this, there is a verification process on the lender’s side that will determine your stipulated loan amount based on the value of assets pledged.

  • Quick Financing Alternative 

As mentioned previously, selling assets in a time of financial emergency or crunches can be an easy way out, but surely not a sustainable decision in the long haul. Availing an LAS can be an even quicker method of financing as it has instant approvals. The approval period, due to verification, takes 24 hours. After this, the loan amount is disbursed into your account in a span of 48 hours.

  • Higher Value, Greater Loan Amount

Over the course of your loan tenure, the value of your assets is evaluated periodically to see any appreciation or depreciation in their value. In case of a depreciation, the borrower must compensate by pledging more assets. In the event of an appreciation, however, the borrower’s ability to draw money increases. Due to the increased value of the securities, you will be entitled to a larger sum of money which can enable more financing. 

  • Flexibility 

Loans against securities come with flexibility in varied spheres. One of the main concerns of any individual when undertaking a loan is the interest rate. Loan against securities interest rates are relatively less due to them being secured with collateral. In addition to this, they also give borrowers the option to pay off their debt in advance and most lenders do not charge a prepayment penalty. This way, you can foreclose your loan and get your securities back, hence, allowing you to preserve future appreciation in value of the assets.

  • Interest Dependent on Amount Used

It is a common misconception that in an LAS the interest is applicable to the entire value of the securities pledged. This discourages many people from undertaking this loan as they expect hefty interest rates. This is far from the truth. The interest is only levied on the amount you choose to use out of the stipulated amount assigned to you under the loan amount. 

Conclusion:

Although selling property, shares, bonds, and other assets seems like a viable option. It is not the wisest decision when looking at the larger picture. Borrowers must understand that there are some losses they will incur by succumbing to the former as it leads them to losing out on future values of the asset. Undertaking a loan against securities has the twin benefits of availing the advantages of your assets as well as getting funding through it. Lenders offers competitive interest rates, flexible loan amounts, and tenure. To top it all off, the process is simple and can be availed in a very short period of time!