Get the Tata Capital App to apply for Loans & manage your account. Download Now

Blogs SUPPORT
Loans For You
Loans for Business
Investment
Insurance
Apply
Quick Links for loans
Quick Links for Insurance
Investment
Offers Quick Pay
Back

Equipment Finance

Avail Digital Equipment Loans
up to Rs. 1 Crore

  • Attractive ROIs
  • Customizable Loan tenure
Know More
Back

Equipment Leasing

Avail Leasing solutions
for all asset classes

  • Up to 100% financing
  • No additional collateral required
Know More
Menu  
 
Apply Now

Tata Capital > Blog > Loan on Securities > 5 Important Rules to Follow While Taking Loan Against Securities

Loan on Securities

5 Important Rules to Follow While Taking Loan Against Securities

5 Important Rules to Follow While Taking Loan Against Securities

For individuals and small businesses, investing in a financial asset can be profitable in the long term. Especially during a shortage of funds, when liquidating assets is seen as a way to meet unexpected financial demands. However, a more beneficial approach to avail funds is to pledge financial assets as securities and avail a loan against them.

Learn More

What Is a Loan Against Securities?

A loan against securities is a type of loan borrowed by pledging or keeping securities such as bonds, shares, units, or mutual funds as collateral with a lending institution. The loan amount is made available to the borrower through an overdraft facility.

The overdraft facility comes with a credit limit and allows the borrower to withdraw any sum of money when a need arises. The overdraft limit and the interest rate charged on the loan amount are directly based upon the nature of securities.

Listed below are five important rules that one must follow while taking out a loan against securities.

Choose the lender wisely

If you have a strong portfolio of financial assets, you might avail a higher loan amount for your securities. Every lender provides a list of approved securities that can be used as collateral. Ensure that you choose a lender that approves a wider range of financial assets. If you have varied assets as collaterals, it will further enhance your creditworthiness.

Additional Read:- Tips to Qualify for Availing Loan Against Security

Consider flexible repayment tenure

A loan against securities is a secured loan and therefore, more flexible. Since the loan is taken against collateral, you also enjoy lower rates of interests in comparison to a personal loan. The interest is charged monthly on the outstanding balance in the overdraft account. When you apply for this loan, consider a lender that offers flexible repayment facility.

Review the overdraft terms

Each overdraft facility comes with an approved credit limit. Borrowers can withdraw any amount of money from the overdraft facility, provided they don’t go over the stipulated limit. Since an overdraft facility is the primary credit agreement with a lender, borrowers must not overlook how their collaterals are valued or the limit imposed on the credit flow. Therefore, reviewing the overdraft terms with the lender is highly recommended.

Estimate the collateral value

Lenders evaluate the worth of your financial assets before approving a loan amount or a credit limit on the overdraft facility. Therefore, the nature of collateral directly affects the nature of lien that will be used for it. In case you pledge volatile financial assets as collateral and their value falls, the lender might ask you to replenish the loss by pledging other securities. Thus, ensure you have a fair estimation of the market price for your collateral.

Learn about the hidden charges

Lenders often charge a maintenance fee for providing the overdraft facility. Other charges may include a processing fee for the credit agreement. Additional interest may also be charged from a borrower if the approved limit falls short of the availed loan amount. Learning about such hidden charges can help borrowers in managing loan servicing efficiently.

Additional Read:- How Does a Loan Against Security Work?

In Conclusion

If you are thinking of liquidating your assets to deal with a financial emergency, think again! A loan against securities will not only help you retain said assets but will also ensure that you have enough working capital to cover the daily costs of running your business.

Apply Now Check EMI
Disclaimer

Leave a Reply

Your email address will not be published. Required fields are marked *

Most Viewed Blogs

Trending Blogs

Calculator

Personal Loan EMI Calculator

Personal Loan EMI Calculator
Home Loan EMI Calculator

Home Loan EMI Calculator
Business Loan EMI Calculator

Business Loan EMI Calculator
Used Car Loan EMI Calculator

Used Car Loan EMI Calculator
Two Wheeler Loan EMI Calculator

Two Wheeler Loan EMI Calculator
Loan Against Securities Calculator

Loan Against Securities Calculator
Loan Against Property Calculator

Loan Against Property Calculator
More Tools
Our Subsidiaries
Our Other Websites

Important Information

Investor Information

Visit us on:,Visit us on: www.tatacapitalmoneyfy.com,www.tatacapitalmoneyfy.com

Our Private Equity Funds

Amalgamated Companies

Top Branches

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download

Policies, Codes & Other Documents

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download

Tata Capital Solutions & Services

Uh oh, something went wrong

Please try again later.