- Is it possible to take a loan against shares from a Bank? If so, what is the benefit of having such a loan?
- Read here the benefits and features of Loans Against Shares facility of different banks such as SBI, HDFC Bank, ICICI Bank, etc.
Getting an unsecured loan from any lender can be difficult for individuals having a poor credit score (considered a score below 650). Lenders also like to charge higher interest rates when such individuals want a loan. Such individuals, therefore, go for a Secured Loan where lenders don’t check credit scores to assess eligibility. Before going for a secured loan, the most common question that people often ask – ‘Is it possible to take a Loan against Shares from a bank’ – as Share is one of the most popular investment products among customers.
The answer to this question is YES, you can get a Loan Against Shares from a lender! Several top banks like State Bank of India (SBI), HDFC Bank, ICICI Bank, IDBI Bank, Standard Chartered Bank provide the option of Loan Against Securities. These securities include Mutual Fund Units, Life Insurance Policy, National Savings Certificate (NSC), etc. When individuals pledge their shares as collateral, lenders provide the loan amount against their dematerialized shares.
Affordable interest rate is one of the benefits of Loan Against Shares provided by banks. You must be thinking this is the only benefit? No, there are several other benefits that you can enjoy too. We will discuss the same in this article. Apart from this, we will also tell you about the features of this loan facility provided by different banks. So, let’s start.
Table of Contents
- 1 Benefits of Loans Against Shares
- 2 Features of Loan Against Shares from Different Banks in India
As we told above that one of the most important benefits of Loan Against Shares is that individuals can enjoy lower interest rates on the loan amount. Lower rates automatically result in lower repayment amounts. But apart from this, there are several other benefits that customers can enjoy. These features are No role of Credit score in Eligibility, Scope for Improvement in Credit Score for people having a poor score, Higher Loan Amount if the value of shares is high, Quick Disbursal, etc.
Before applying for a Loan Against Shares, it is necessary to know about these features in detail. We are showing each of these benefits below. Please check!
Affordable Interest Rates
Interest Rate happens to be one of the most crucial aspects of any loan whether secured or unsecured. One of the reasons behind the popularity of a loan against shares among individuals is its lower interest rates. The reason being the secured nature of the loan facility. Loan Against Shares interest rates usually changes from one bank to another. Also, the best thing is that banks don’t charge interest on the overall loan amount. Instead, you will only need to pay interest on the amount being utilized, and for the period you are utilizing this amount. The interest will be calculated on the daily outstanding balance that will be debited from your loan account at the end of every month.
We are showing interest rates on Loan Against Shares of top banks like SBI, HDFC Bank, ICICI Bank, Standard Chartered Bank, etc. Have a look!
|SBI||9.75% per annum|
|Axis Bank||10.50% - 12.75% per annum|
|Standard Chartered Bank||Customized|
No Role of Credit Score While Applying for the Loan
People with poor credit scores often face rejection from lenders when they apply for a loan. In some cases, they have to pay higher interest rates than regular rates. That’s where a Loan Against Shares can help people. Since this loan is secured, lenders don’t check the credit score of individuals. Credit Score is one of the most important aspects when you are going for a secured loan as it defines an individual’s creditworthiness. But when you opt for a Loan Against Shares, you put your shares as the collateral and lenders feel less credit risk. So, if you are an individual with a poor credit score and want money to meet your needs instantly, a loan against shares can be one of the suitable options.
Customers with Poor Scores can Improve their Credit Score
If you are struggling with a poor credit score and want to improve it, a loan against shares might prove to be helpful. One of the most important aspects of your credit score is your repayment history as it has around 35% of the overall weightage. So, if you repay your loan against shares on time, your credit score will improve over the repayment tenure. You should also remember if you don’t repay your loan on time, it can reduce your credit score further.
Higher Loan Amount
One of the important benefits that customers get when they apply for a loan against shares is the higher loan amount if the present market value of their shares is high. The reason: lenders provide loan amounts up to 50% of the overall market value of your share. So, your loan amount directly depends on the market value. The higher will be the market value of your share, the higher the loan amount you will get from the lender. Also, in the case of a Loan Against Shares, the loan amount tends to change from one lender to another.
Now you have some information about the benefits of Loan Against Shares, you should also know about the features of this facility provided by different banks in India. Check them out below!
SBI, the largest lender of India, provides the option to raise funds against your investments in shares. With the SBI Loan Against Shares facility, customers can opt for the loan amount ranging from INR 50,000 – INR 20 lakh with a repayment tenure of 30 months. However, the final loan amount will depend on the overall market value of your share. The loan can be a maximum of 50% of the value of the shares. Customers will also need to provide a margin amount of 50% of the current market value of shares that you pledge as security.
The loan can be taken via Demand Loan or Overdraft Loan according to your convenience. The processing fee is fixed at 0.75% of the loan amount plus applicable GST with a minimum of INR 1,000. Remember, this fee is non-refundable in any case.
With HDFC Bank Loan Against Shares, customers can get a loan amount upto 50% of the present value of the shares. The best thing about this facility is this loan can be availed via Internet Banking in three easy steps and the loan amount will be disbursed into your account. The whole process will be paperless. Customers can get a minimum loan amount of INR 50,000 that can be used for any personal purpose. To apply for this loan facility, HDFC customers should have a Current, Savings Account & Demat Account. Also, Demat Holding should be in the single name of an individual.
By pledging your shares in favor of ICICI Bank, customers can opt for a Loan Against Shares facility with which they can get an Overdraft facility of up to a fixed value. Also, the bank will charge interest only on the utilized amount and for the period you will utilize. With a loan amount ranging from INR 50,000 to INR 20 lakh, customers can draw up to 50% of the present market value of shares. The repayment period is 1 year, and you can renew at the end of each year. Any individual with 21 years to 75 years of age can apply for a Loan, and ICICI Bank will take the final decision after submission of all the documents.
With Axis Bank, you can also get a loan amount upto 50% of the present market value of shares. With features like NIL prepayment charges and an Overdraft Facility, Axis Bank Loan Against Shares is one of the popular choices among customers. Any resident Indians or NRIs above the age of 18 years can apply for a Loan against Shares. To apply for this facility, you only need to visit the official website of Axis Bank, and by following the simple steps, you can get the loan amount into your account.
Standard Chartered bank is one of the leading private banks that also provides loan against shares facility to customers. With this facility, customers can opt for this loan withdrawing or operating capacity upto 50% of the present value of shares. An individual can get a loan amount that can go upto INR 20 lakh, and it will also depend on the overall market value of your share. You can use this loan amount for both personal and business purposes. The applicant’s age needs to be 21 years or above to be eligible for getting a Loan Against Shares.