The easy guide to applying for loan against securities

Your LAS application process can be a breeze after understanding the features of the loan.

There comes a time in the growth cycle of every business, when taking a business loan becomes imperative to upgrading the business, acquiring new machinery, or purchasing new commercial premises. At this juncture, a deft solution is to take a loan against shares.

The loan against shares, as the name suggests, is a loan offered to you after you pledge your shares as collateral with a bank or financial institution. This option lets you monetise your owned securities at short notice, so that your business goals remain on track and you don’t have to liquidate your other assets. The only stipulation is the shares you pledge must be your own, and before applying for a loan against shares, find out from the prospective lending institution about their:

1. List of approved securities. Every bank and financial institution has a list of approved securities that they can offer a loan against. It is prudent to ask for this list from your preferred financial institution before you apply for a loan against shares. This will save valuable time for both you and the lender.
2. Rate of interest. The lending institution will offer you the loan against shares at a certain rate of interest. Find out the rate of interest being offered by at least three other comparable lenders before you make your decision. Interestingly, the interest charged on this category of loans is lower than that of personal loans or credit card loans. You are charged interest on the balance loan amount in your overdraft account.
3. Terms of use. Once the loan is approved and disbursed, you have the freedom to withdraw the funds as you wish. You are not required to withdraw the entire loan amount at once. You can use the money in stages as per your requirement. If you apply for loan against shares from a bank, you will be given an ATM card linked to the overdraft account, and you can withdraw money using the ATM card. Also, you can repay the money in equated instalments and incremental sums paid every few months.
4. Special factors. In most cases, the charges for processing the loan application, maintaining the overdraft account, stamp duty and registration of the loan agreement between you and the lender, etc. will be mentioned in a separate schedule of fees.