Loan on Securities

Loan Against Shares: Benefits, Risks & Ultimate Guide

By Tata Capital
15 January 2026
11 mins read
2437

Boom! Crash! You will hear these words around Dalal Street every few days. No, that is not an accident-prone area. It is the sound of the stock market going up and down.

The market’s volatility regularly creates winners and losers. In such a scenario, what if you need urgent funds? Are your shares of any help?

Yes, indeed. Several financial institutions offer loan against securities for customers’ short term funding needs. Loan against shares, government bonds, insurance policies, and other investments come under this category, giving people the opportunity to fulfil their dreams without liquidating their investments.

But, like other things, a loan against securities has its pros and cons. Below are some essential points to help you make an informed decision.

What is a loan against shares or stocks?

A loan against shares or stocks is a secured loan where you pledge your equity shares, mutual funds, or other securities to raise funds without selling your investments. With a loan against stocks, you retain ownership and continue benefiting from potential market gains, dividends, or bonuses. The loan amount is usually a percentage of the market value of pledged securities, known as the Loan-to-Value (LTV) ratio. One of the key benefits of loan against securities is quick access to liquidity at lower interest rates compared to unsecured loans. Many borrowers also wonder, can I get loan against shares for personal or business needs-yes, most financial institutions and lenders in India offer flexible usage options. Repayment is typically convenient, making it a smart short-term financing solution.

Advantages of a loan against shares

A loan against stocks can be a smart way to unlock funds without selling your investments. Here are the main benefits of loan against securities:

Quick access to funds for urgent personal or business needs.

Retain ownership of your shares and continue earning dividends or bonuses.

Lower interest rates compared to unsecured loans, making it cost-effective.

Flexible usage, money can be used for any purpose.

Higher loan amounts based on the market value of pledged securities.

Convenient repayment options such as EMIs or bullet payments.

Minimal documentation ensures faster processing.

If you’re wondering, can I get loan against shares, most lenders in India offer this facility.

Disadvantages of a loan against shares

While a loan against stocks offers many advantages, it’s important to be aware of the drawbacks. Here are the key disadvantages and cautions to consider as part of the benefits of loan against securities assessment:

Market risk: Falling share prices may trigger a margin call or require additional collateral.

Limited loan-to-value: Financial institutions may offer only a percentage of your shares’ value.

Interest obligations: Even if your shares perform well, interest must be paid regularly.

Risk of forced sale: Non-payment may lead the lender to sell pledged securities.

Eligibility criteria: Many ask, can I get loan against shares only if their portfolio meets lender norms.

Key factors to consider before applying

Before opting for a loan against stocks, it’s essential to evaluate certain aspects to maximise the benefits of loan against securities. Consider the following key factors:

Loan-to-Value (LTV) ratio: Determines how much you can borrow against your shares.

Interest rate: Compare rates across lenders.

Market volatility: Falling share prices can trigger margin calls.

Repayment terms: Check EMI or bullet repayment options.

Eligibility: Many wonder, can I get loan against shares—ensure your portfolio qualifies.

Careful consideration of these factors ensures a safer and smarter borrowing decision.

Also,read – Loan Against Bonds: Know Its Meaning and Definition

Eligibility and documentation requirements

To apply for a loan against stocks, knowing the eligibility criteria and required documents is crucial to enjoy the benefits of loan against securities. Here’s what you need to know:

Eligibility criteria: Applicants must be Indian residents, have a demat account, and hold eligible shares or securities.

Minimum portfolio value: Lenders may require a minimum value of pledged securities.

Income proof: Salaried or self-employed individuals may need to submit income documents.

KYC documents: Identity proof, address proof, and PAN card are mandatory.

Application form: Complete the lender’s loan form accurately.

If you’re asking, can I get loan against shares, meeting these requirements is essential for approval.

Who is eligible to apply?

When considering a loan against stocks, it’s important to know who qualifies to avail the benefits of loan against securities. Here’s a breakdown of eligible applicants:

Indian residents: Only residents of India can apply for this loan.

Demat account holders: Applicants must have a valid demat account with eligible shares.

Salaried individuals: Must provide proof of stable income.

Self-employed professionals: Need to submit business or income documents.

Minimum portfolio value: Financial institutions may require your pledged shares to meet a certain market value.

Basic eligibility requirements

To make the most of a loan against stocks and understand the benefits of loan against securities, it’s important to check if you meet the basic eligibility requirements:

Residency: Must be an Indian resident.

Demat account: Hold a valid demat account with eligible shares or securities.

Income proof: Salaried or self-employed applicants need to provide proof of income.

Minimum portfolio value: Lenders may require a certain market value of pledged securities.

KYC compliance: Identity proof, address proof, and PAN card are mandatory.

Also,read – Loans Against Mutual Funds: All You Need To Know

Documents required for application

When applying for a loan against stocks, having the right documents ready ensures a smooth process and helps you enjoy the benefits of loan against securities. Here’s a list of essential documents:

KYC documents: Identity proof, address proof, and PAN card.

Demat account statement: Proof of holdings in eligible shares or securities.

Income proof: Salary slips, bank statements, or business proof for self-employed applicants.

Application form: Complete and signed loan application as per lender requirements.

Additional documents: Any lender-specific forms or declarations.

How to apply for a loan against shares

If you’re looking to unlock funds without selling your investments, here’s how to apply for a loan against stocks and enjoy the benefits of loan against securities:

Step 1: Check eligibility – Ensure you meet residency, demat account, and income criteria.

Step 2: Gather documents – KYC proof, demat statements, income proof, and application form.

Step 3: Choose a lender – Compare financial institutions for interest rates and LTV ratio.

Step 4: Submit application – Provide all required documents accurately.

Step 5: Loan approval & disbursal – Upon verification, funds are credited to your account.

For those wondering can I get loan against shares, completing these steps carefully helps secure quick approval

How interest rates and repayment work

Understanding interest rates and repayment is crucial when taking a loan against stocks to fully leverage the benefits of loan against securities. Interest rates on such loans are generally differ from those of unsecured loans, as the loan is secured against your shares. Rates can be fixed or floating, depending on the lender. Repayment options are flexible, including EMIs, bullet repayment, or part-prepayment, allowing you to manage cash flow efficiently. Interest is charged only on the amount drawn, not the entire sanctioned limit. Regular repayment ensures you avoid penalties or forced sale of pledged securities, helping you retain ownership and continue benefiting from dividends, bonuses, or market appreciation.

The Pros

Lower interest rates

A loan against securities of any type has a lower interest rate than most unsecured loans and credit cards, as it is a secured loan. That means borrowers can pledge the shares as collateral for taking a loan. Depending on your stock list, a loan against shares’ interest rate can go as low as 10.5%. Before taking a loan, you should compare the low-interest rates of a loan against shares and choose the one that suits your needs.

Flexible repayment options

Here are two types of repayment options for a loan against securities:

Hybrid Term Loan

Demand

In a hybrid term loan facility, the lender limits the borrowing against shares pledged. You can choose to borrow any amount within the limit. The interest will depend on the loan amount borrowed and the tenure. Also, the limit is revised every year to adjust the loan against the current value of shares.

So, if the value of your stocks rises, your limit on the loan against shares will also increase. Under this scheme, lenders also give you the option of repaying only the interest every month, allowing you to repay the larger amount (principal) at the end of the loan tenure.

The demand facility allows you to borrow the whole loan amount at once. Your total repayment amount (principal + interest) is divided into EMIs throughout the loan tenure.

Continued returns and dividends

In cases of loans against securities, the units remain invested in the market, and you can avail all the benefits of your investments. Whether it is a dividend from preference shares or an interest income from a bond, the lender has no authority over these payments. You can continue receiving gains from your investments as long as you do not default on your repayments. You can use this extra income to pay off your EMIs or save for your future.

Easy processing

Any income proof or credit score does not determine the loan against shares eligibility. Since these are secured loans, the lender defines the loan against shares interest rate, tenure, and other specifications purely based on the stock list and its value. This simplifies the loan approval process. In addition, the loan amount will be credited to you in two or three days. Therefore, a loan against shares proves to be a convenient option for many borrowers requiring emergency funds.

The Cons

Low loan-to-value

The lender will decide the loan against securities’ interest rate, amount, and tenure depending on the value of your securities pledged. Usually, it amounts to 60-80% of the collateral’s value. This can be a setback for those who want a large amount or have low-priced stocks.

Cannot sell shares

In cases of loan against equity shares, not being able to sell the shares at the correct time can be a disadvantage for shareholders. If a share value decreases drastically, it can significantly reduce your portfolio’s worth. The lender can then lower the loan against shares’ maximum limit and ask you to repay some amount from the principal. You can gain full authority over your investments after repaying the loan entirely.

Not suitable for home loans

Generally, the loan against securities interest rate is 2-3% higher than a home loan. Also, in this real estate market, a borrower will need the loan to cover a large portion of the property’s cost. Due to various restrictions on loans against shares eligibility criteria, you will need an extensive portfolio of high-value stocks to borrow such a large amount.

Stocks should match the lender’s list.

A lender can provide a loan against equity shares on only those stocks that are included in the lender’s official list. This is done to maintain the credibility of the stocks pledged by borrowers. If your portfolio has shares of companies not listed with the lender, there is a high chance that your loan application will be rejected. Therefore, it is always advisable to check the list before discussing other details like a loan against shares’ interest rate, total amount, or tenure.

Risks and market impact

While a loan against stocks offers liquidity, it also carries risks that can affect your investments and the benefits of loan against securities. The primary risk is market volatility: If share prices fall, the lender may issue a margin call, requiring additional collateral or partial repayment. Failure to meet this can lead to forced sale of pledged securities. Interest obligations continue regardless of market performance, which may strain finances during downturns. Additionally, not all securities are eligible, limiting borrowing potential. Understanding these risks helps you plan better, maintain control over your portfolio, and ensure that the benefits of loan against securities outweigh potential drawbacks.

The bottom line

Securities are valuable assets not only today but also for your financial future. Therefore, before taking a loan against equity shares or other valuable investments, you should do thorough research. To get started on this endeavour, check out Tata Capital’s website. Understand and explore their key features like loan against securities’ interest rate, auto-renewable tenures, and zero prepayment charges.

It is better to take a loan than redeem your shares for lower values when the market is down. Make sure you are not over-leveraging yourself. Assess your financial capability thoroughly and enjoy the benefits from it.

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FAQs

What is a loan against shares and how can I apply?

A loan against stocks lets you pledge shares for funds. Apply via financial institutions or lenders with documents. Many ask, can I get loan against shares quickly.

Which shares and securities are approved for LAS in India?

Eligible securities include listed equity shares, mutual funds, and government-approved bonds, forming the basis for benefits of loan against securities.

Can I take a loan against stocks for business expansion or personal use?

Yes, funds can be used for both purposes. Borrowers often ask, can I get loan against shares for flexibility.

What are the benefits of loan against securities over a personal loan?

Lower interest, retention of ownership, and flexible usage are key benefits of loan against securities compared to personal loans.

What are the main risks if the share prices fall after pledging?

Falling prices may trigger margin calls, additional collateral, or forced sale of pledged shares.

Who is eligible for loan against shares in India?

Indian residents with a demat account, eligible securities, and income proof can apply for loan against stocks.

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