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Tata Capital > Blog > Loan on Securities > Is it possible to opt for loan against securities on a lower interest rate?

Loan on Securities

Is it possible to opt for loan against securities on a lower interest rate?

Is it possible to opt for loan against securities on a lower interest rate?

Emergencies come unannounced. You might be enjoying your day nonchalantly, and before you know it, a sudden predicament appears. Most of the time, these unexpected situations also demand an urgent need for money.

What do you do to arrange funds on such short notice? Will you liquidate your assets even if it means bearing a loss, or will you reach out for a personal loan with high-interest rates? In both cases, you will end up with a financial burden. A better alternative will be to take a loan against securitiesat an affordable interest rate.

Read on to learn more about the loan against shares interest rates and how to bag the best deal.

Know more about a loan against securities

As the name suggests, a loan against securities is a type of loan where you borrow funds by pledging your assets or securities as collateral. This includes stocks, mutual funds, ETFs, bonds, and insurance policies.

A loan against securitieshelps you leverage your investments without liquidating them and missing out on future gains. The best part of this loan is that you will continue to receive the dividends or interest on your securities.

Furthermore, with a loan against securities, you can avail of up to 50-70% of the value of your investment. This amount is based on factors like the type of security, volatility, and market conditions.

The loan against shares interest rates are also much cheaper than personal loans, making them easier on the pocket. You can further lower the rate by opting for a shorter tenure or pledging high-value securities. However, the interest rate on loans against securities depends on several other factors. Let’s explore them in detail.  

Factors affecting your loan against stock interest rates

The interest rate on loan against securitiesis affected by your personal and financial profile as well as by various market factors. Some of them are:

1. CIBIL score: Your CIBIL or credit score is crucial to determining your creditworthiness. It helps lenders assess your financial discipline and determine the loan amount and interest rates you qualify for.

2. Income stability: A borrower with a good and stable capital inflow is always considered a suitable candidate for any loan. With a high income and stable employment status, you can enjoy potentially lower loan against securities rate of interest.

3. Type of securities: The risk factor and volatility of the security play a significant role when applying for a loan against securities. A highly liquid and stable security can fetch lower interest rates than volatile assets.

4. Market conditions: The current condition of the country’s economy and financial markets also affect the loan against shares interest rates. It fluctuates based on market rates, inflation, and changes in monetary policies.

How to lower your loan against shares interest rates?

While a loan against shares interest rates is much cheaper than a standard personal loan, there are several steps you can take to acquire a lower interest rate and make the loan more affordable. These include:

1. Maintaining a strong credit score: Maintain your CIBIL score by ensuring timely payments of your previous loans, credit card bills, and other EMIs. A solid loan repayment history and a high credit score will position you as a favourable borrower, increasing your chances of securing lower interest rates.

2. Minimize loan amount:Analyse your needs and only borrow what is needed. A higher loan amount will increase the risk incurred by the financial institution, which increases your loan against shares interest rates. Hence, you can get a better deal by reducing the loan amount.

3. Avoid high-risk securities: Pledge securities that are less risky and can generate a fixed income. A low-risk security is more secure as collateral than a highly volatile one. Therefore, by pledging securities like bonds, FDs, and debts, you can ensure a lower interest rate on your loan. 

4. Analyse market conditions: Study the market and have a clear view of the current financial conditions before applying for a loan against securities. If it is not an emergency, approaching the lender at suitable market conditions can get you more value for your securities at a much lower interest rate.

5. Relationship with the lender: Approaching a financial institution whose services you have already availed of is also a good move. Most lenders strive to keep a long relationship with their customers. Moreover, if you have a positive history with them, such as timely repayments and good banking relationship, it can help you negotiate better terms and lower your interest rates. 

Benefits of taking a loan against securities

A loan against securities offers the following benefits:

1. Lower interest rates: With your securities pledged as collateral, the lending institution will sanction the loan amount with an interest rate much lower than a standard personal loan.

2. Overdraft facility: You can leverage the overdraft facility with a loan against securities from Tata Capital. It allows you to withdraw additional funds up to a pre-determined limit and only pay interest on the utilised amount.

3. Security switch: Tata Capital allows you to switch your pledged securities of the same value with different ones at any time during the loan tenure. This way, you can actively benefit from market trends and manage your portfolio to get the best returns.

4. Quick loan disbursement: After verifying your application, securities, and documents for a loan against securities, we will sanction the loan and disburse the amount in a few days.

In a nutshell

Owing to the secured form of loan and fast approval process, a loan against securities is quickly becoming a preferred and cost-effective loan option. You can avail of the loan at low-interest rates by conducting thorough market analysis and maintaining a strong financial record.

Moreover, with Tata Capital, you can enjoy benefits like a digital application process, zero foreclosure charges, overdraft facility, and security switch. Visit our website to apply today.

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