Get Loan Against Shares Online in India

Category : Knowledge Center

Whether it is to meet financial emergencies or fulfill certain short-term or long-term goals, availing a loan has become easier and more acceptable than ever before. However, with such a high demand for loans, they are often accompanied by high-interest rates, making them unapproachable and unaffordable for numerous people. Moreover, they often require the placement of cherished possessions or real estate as collateral, making them a risky option.

If you are looking to avail of a loan but do not want to tie up your physical possessions, an effective alternative can allow you to get a loan and make the most of your share market investments - a loan against demat account shares.

How does a loan against demat shares work?

A loan against your demat shares is a process through which you can avail of a loan by pledging your shares as collateral. A loan against demat shares helps you monetize your investments without selling them to realize the capital amount. A loan against demat shares requires no collateral or additional securities apart from the shares already in your demat account.

Here are some points that make a loan against demat shares an ideal borrowing option:

It's better to apply to the same financial institution:

You can avail of a loan from the same financial institution from which you are availing of the Demat account service. If you avail your loan from the same financial institution that holds your demat account, the disbursement of your loan against demat shares becomes seamless. In essence, you are simply borrowing the funds from the financial institution as it pledges your shares against the received funds.

You can ensure this ease of disbursement by making sure to open a demat account with a reputable financial institution that provides convenient loans against securities.

Benefits of a loan against demat shares:

When you avail of a loan against demat shares, your shares are essentially held as collateral. While your demat shares are pledged as security for the loan, you still continue to receive the various benefits of your share investments. This includes receiving and retaining not only the dividends but also your due bonuses and rights.

Eligibility criteria for availing a loan against demat shares:

To avail of a loan against the shares in your demat account, you must first ensure that you are eligible for the loan process. Here are the eligibility criteria:

• You must be in the age range of 21 to 65 years.
• Only the shares in the name of individuals and corporates can be pledged. You cannot pledge shares in the name of minors, HUFs, NRIs.
• You will also be required to submit certain essential documents. These include identity proof, proof of address, proof of income, and a statement from your DP (Depository Participant).
• You cannot pledge the shares of a company in which you are a Director or a Promoter.

What to avoid while availing of a loan against Demat shares?

While availing of loans against the shares in your Demat account is a convenient option, it is important to utilize these funds responsibly and cautiously.

Some investors avail of loans against their Demat shares only to reinvest the money back into the market. However, if the market goes into a bearish trend, this move can result in considerable losses as you will still have to pay the interest to the financial institution. Therefore, it is recommended to avoid this strategy. Instead, it is best to utilize the loan amount for financial emergencies or to meet financial goals, such as covering household expenses, weddings, education, and capital for business investments.

Conclusion

By availing of a loan against your Demat shares, you too can unlock the borrowing benefits of your share market investments. The key is finding the right financial institution that can provide you with an ideal Demat account and a facility to avail a loan against your Demat shares. You can consider opening a trading and Demat account with Libord.

Libord offers its investors an all-in-one account through which you can make various investments via a single technology-backed trading platform. Moreover, the Libord also offers investors the benefit of availing a loan against securities, including Demat shares.