In this article we are going to cover what is LAS and some of the underlying facts about it.
Loan against Securities helps borrowers avail a loan against the securities that they hold, by merely pledging and not selling them.
Below are some of the securities against which you can avail loan,
- Equity
- Mutual Funds
- Unit Linked Insurance Plan (ULIPS)
- Fixed Maturity Plans (FMPS)
- Tax-free Bonds
- Insurance Policies
- Sovereign Gold Bonds
- National Savings Certificate (NSC)
- Kisan Vikas Patra (KVP)
- Gold deposit certificates
Key advantage of using LAS is that, one can retain the ownership on their investment. In case of equity, one can continue to participate in rights and receive dividends and bonus. In case of insurance, you will still be life covered, however there can be clauses such as “LIC should be free of locking period with ready surrender value” for you to be eligible for such loans.
Loan amount will vary based on the the securities you choose. For example, in case of equity lenders may sanction loan upto 50 percent due to the volatile nature of the underlying.In some cases, if the stocks you invested is not on the lender’s list your loan may be denied. To get an idea take a look at Yes bank’s list of approved securities in the link.
Most banks, offers you loan in the form of over draft facility, so you can pay interest only for the amount you are consuming. Brokers such as sharekhan also offers LAS. Interest spread will be 1 or 2 percent higher or even more, as compared to loan against fixed deposit which we covered in an article earlier. Processing fee, stamp duty etc are applicable for this type of loan. Minimum loan amount and maximum loan amount varies from lenders to lender.
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