What is a loan against security?

At times of a cash crunch, you may take a loan from an authorized bank against securities that you hold, like mutual fund investment, life insurance policies etc. by pledging them, instead of selling them.

How does loan against security work?

A current account is opened in the name of the borrower of the loan. An overdraft facility is provided to the borrower. The limit of the overdraft is determined depending on the value of the securities that are pledged. The interest rate is calculated only on the amount and the tenor for which such funds are utilized.

How to apply for a loan against securities?

Loans can be availed against securities either through online or offline mode from any bank. For the online mode, the documents required for the application have to be uploaded along with the application on the website of the bank. For offline mode, the application form along with the required documents can be submitted in the nearest branch of the bank. Banks have certain minimum criteria for eligibility to apply for such loans. For example, the borrowers should not be less than 21 years of age at the time of application for such loan.

Which documents are required to apply for loans against securities?

There are certain documents which are mandatory to avail loans against securities. These are:

Pan Card

Adhar Card

Any other KYC requirement like address proof,

Duly filled application form and loan agreement form.

Demat Account Statement or a statement showing value of holdings.

Pledge form to authenticate the pledge of the securities.