For Loan Against Shares
Loan Against Shares (LAS) is a type of loan where borrowers can pledge their existing shares, stocks, mutual funds, or securities as collateral to obtain a loan from a financial institution. The loan amount is determined based on the value of the pledged securities, and borrowers can use the funds for various purposes such as business expansion, personal finance needs, or investment opportunities.
What securities can be pledged for a Loan Against Shares?
Shares of listed companies, mutual funds, bonds, and other approved securities can typically be pledged for LAS.
What is the loan-to-value (LTV) ratio for Loan Against Shares?
The LTV ratio varies depending on the financial institution and the type of securities pledged. It typically ranges from 50% to 75% of the value of the pledged securities.
What are the interest rates for Loan Against Shares?
Interest rates for LAS can vary based on factors such as the borrower's creditworthiness, the value of the pledged securities, and market conditions. They are usually lower than unsecured loans but higher than mortgage loans.
What are the tenure options for Loan Against Shares?
The tenure for LAS can range from a few months to several years, depending on the lender's policies and the borrower's preferences. Some lenders offer flexible repayment options.
Can I continue to earn dividends on pledged shares?
In most cases, borrowers can continue to receive dividends and other benefits from the pledged shares unless specified otherwise by the lender.
What happens if I fail to repay the Loan Against Shares?
If the borrower defaults on the loan, the lender has the right to sell the pledged securities to recover the outstanding amount. It's essential to maintain timely repayments to avoid such situations.
Is Loan Against Shares a good option for short-term financing?
LAS can be a convenient option for short-term financing needs, especially for investors who want to leverage their existing securities without liquidating them.
Are there any tax implications for Loan Against Shares?
Tax implications vary based on the borrower's jurisdiction and the specific terms of the loan. It's advisable to consult a tax advisor for personalized advice.
