Although selling your financial securities may seem convenient for instant liquidity, it could lead to a loss of potential gain you might earn in the long run. Instead, pledging them as collateral for a loan could be safer and wiser. And what makes it so is the list of loans against securities benefits.
A quick loan against equity stocks, mutual funds, or other financial securities is a safe borrowing option for those having investments in equity stocks or mutual funds but do not want to liquidate their holdings for short-term cash requirements. It is a facility that lets you unlock quick capital for your short-term needs without compelling you to sell off your financial assets and restrict your growth prospects. A loan against securities brings to the table several benefits, which is why it is a safe option. Read on to know.
A high-value loan made easy and convenient
Unlike an unsecured loan product that requires a high credit history and hefty paperwork for even a small credit, a loan against securities comes with no such terms and offers a high-value loan. The loan amount sanctioned will depend on the value of your equity stocks and mutual funds you would like to pledge. It could range from 50-65% of the value of the security you use as collateral. However, the minimum and maximum credit limits may differ from lender to lender. For example, at Abhiloans, borrowers may withdraw a loan amount ranging from Rs. 15000 to Rs. 1 Crore without a credit history check. It is as easy as signing in with your registered mobile number, uploading your KYC documents, and marking the lien. That is how a loan against equity stocks gives you easy access to a high-value loan.
Quick to avail of
It hardly takes hours to unlock capital, not days or weeks. Situations like home renovation, debt consolidation, unexpected hospitalization, and purchases of other assets may require you to arrange immediate cash. That is when an instant loan against mutual funds or a loan against equity stocks may come in handy. It is super quick to access. You need not visit any bank or financial institution to apply for the loan. Nor do you need to undergo hefty documentation to get it credited into your account. You may get it from the comfort of your home or office. The fully digital process makes getting a loan against securities quick and super convenient.
Stock ownership remains intact
Another reason a loan against equity stocks or securities is a safe choice is that borrowers retain the ownership of their investment despite pledging it for a loan. You might have a diverse mix of financial instruments in your investment portfolio, each with a maturity time. If you liquidate them before they mature or when the market condition is not suitable, you lose the potential to grow and earn returns. Instead, if you pledge them in such hard times, your investments remain linked to the market and continue to give you dividends and returns. That given, choosing a loan against securities over liquidating them sounds safer and more prudent alternative during cash shortfalls.
A versatile loan option
This loan facility lets you borrow against a range of securities, such as equity stocks, mutual funds, FDs, insurance policies, bonds, fixed maturity plans, etc. However, the LTV ratio, which determines the loan amount, may differ from one approved asset to another. For example, on equity shares, you may get up to 50% of their value. And if you take a loan on mutual funds, you can get up to 75% of their market value. It makes pledging your financial securities a safe option.
Easy repayment terms
While the loan against securities interest rate is low, it comes with easy repayment terms. It allows you to choose from various EMI plans to fit your repayment capabilities. The EMI includes both the principal amount and the interest. You may also choose to pre-close the loan at any time during the loan tenure. Some lenders impose prepayment charges, whereas others, including Abhiloans, do not.
A quick loan against equity stocks can save you from paying capital gain tax. If you sell your existing shares instead of pledging them, it will be considered a capital gain, which may attract certain taxes ranging from 10% to 15%. If the investments are sold within 12 months after the purchase at a higher price, the income is a short-term gain and is taxable at 15%. And if you sell the investment after 12 months of the purchase at some profit, it is a long-term capital gain and is taxable at 10%.
A loan against securities is a safe and convenient option for investors seeking quick liquidity without selling off their stock holdings. It offers the flexibility to get a high-value loan without a credit score check. It is the best way to leverage your investments to meet your short-term fund requirements. Easy repayment options and tax benefits are other advantages that make this loan a safe choice.