How can I get a loan against my shares online?

Taking a loan against your shares helps individuals and businesses stay aligned with financial goals and manage a cash crisis better.

Every individual or business is in need of periodic funding to improve cash flows and also align with financial goals better. Sticking to a financial plan is easier when reserves are ample. However, this may necessitate the borrowing of funds from banks or financial institutions from time to time.

In this context, it is pertinent to note the important role that shares play in offering immediate liquidity for one’s needs. Holding shares and stocks is useful for both individual investors and companies. Based on the quality of the shares one owns, a bank or financial institutions may extend credit to the business – this is known as a ‘loan against shares’.

Why take loan against shares?

The loan against securities is a term loan granted by financial institutions and banks against the equity shares you or your business owns. You need not disrupt your long term investment plan by liquidating immovable assets such as property; instead, you can avail of a more financially flexible option of taking a loan against your equity shares. It is a faster and more cost-effective solution (at least 100 to 200 basis points lower on interest cost) and saves your other securities, such as gold and property, from coming into the ambit of loans.

Businesses with concrete expansion plans, or those looking for funding to acquire new processes, equipment or skilled manpower to upscale their operations can consider the loan against shares option. It can also be put to use by salaried individuals for such personal requirements as financing children’s higher education or paying for children’s marriage, or even making the payments on a second home.

When you take a loan against shares, you need not sell your shares or give up the bonuses and other accruements on them. The shares are simply pledged to the financial institution or bank for the loan tenure. They are not owned by the lending institution in any form.

How to apply for it

You can apply for a loan against shares online by entering your details on the lender’s website and asking for a call back to know more about the product and its benefits. If you have the requisite information already, you can proceed to fill out the lender’s application form online and submit it to the nearest branch.

Meanwhile, you must dematerialise your shares. You can ask the lender for a list of approved shares and securities: no other securities will be entertained. Peruse the lender’s loan brochure thoroughly so that you are conversant with service charges, interest rates, and other fees. Also get your paperwork in order: the lender will ask to see bank statements for at least one year, income proof, balance sheets, profit and loss statements (in case of business loans), details of other loans taken, etc. 

Once the lender approves your documentation and shares, a current account will be opened in the business’s or individual’s name. You can collect the funds from here, and also pay your loan EMIs to this account.