How to Avail Loans Against Shares, Debentures, and Bonds?

Posted by Arwind Sharma on September 28th, 2018

Today, there are many ways in which you can purchase a loan. Banks and NBFCs have various sources to provide you with immediate funds in times of financial crisis. You can borrow these loans as per your repaying capacity and urgency. Loans Against Shares (LAS) is one such loan which you can avail by pledging some of your purchased shares to the lending institution. LAS can be bought by pledging shares, insurance policies, Mutual Funds, Debentures, and Bonds.

Every lender has a set of approved securities which contains a list of all the shares which are eligible to be pledged. Though this list varies for every institution, lenders also keep changing the list to maintain the stability and value in the future. 

The list usually consists of the following securities:

• NABARD and UTI Bonds
• Demat Shares for NSC and KVP
• Insurance Plans
• Non-Convertible Debentures
• Mutual Funds
• ESOP, IPO and FMP Financing

Who Can Avail This Loan?

Loan Against Shares is a short-term credit scheme which has to be paid back in a maximum of 12 months. You can also borrow LAS to subscribe for the rights and issuing new shares and debentures against the ones which already exist, and are mortgaged as collateral to a financial institution. Who can apply for the said credit facility? Generally, anyone and everyone in an urgent need for cash can avail loan against shares and attain the lucrative benefits.  

You must have reached 21 years of age and should be salaried or self-employed with a regular source of income to avail such loans. Bajaj Finserv offers LAS for any of the securities mentioned above for an amount up to Rs. 10 Crore. You can easily get LAS as per your needs from Bajaj Finserv, at attractive interest rates.

How Much Amount Can Be Availed?

The sum borrowed depends on the type of securities you are pledging to the lender. If the shares are in material form, the amount generally is not more than Rs. 10 Lakhs. However, if the securities are in a dematerialized form, you can avail a larger sum.

When you subscribe to Initial Public Offerings (IPO), you can get a loan amount which doesn’t exceed Rs. 10 Lakhs. However, under ESOP (Employee Stock Ownership Plan), some financiers can also extend the funds, if you are purchasing shares from your company.

Lending institutions have set a minimum limit which is known as margin. For paying advances against these shares and debenture, the amount depends on the banking institutions. The pledging of dematerialized shares and debentures is locked with the lender, till the period when the loan is repaid. The maximum amount which can be availed as loan depends on the total share value, margin set by lenders, and the borrower’s ability to repay. The loan can also be provided with an overdraft account facility. Under this scheme, the interest is payable only for the period for which the withdrawn amount is utilized.

Banks formulate a policy for paying advances to every borrower which is approved by the Board Meeting under RBI regulations. The borrower has to sign a declaration how much loans they have extended from other lenders. The banks base this information on evaluating their creditworthiness. NBFCs like Bajaj Finserv charge a nominal processing fee when you apply online for a loan against shares. There are no extra charges for prepayment and foreclosure of the loan, making the whole process extremely convenient for you.