Loan against security is a type of loan offered to a customer against the pledge of a security, including insurance policy, National Savings Certificate, KVP, mutual funds, non-convertible debentures, NABARD bonds, UTI bonds, Demat shares and so on.
|Loan amount||Up to 90% of the value of security|
|Rate of interest||Varies from lender to lender|
|Tenure||Depends on the customer's requirement and remaining tenure of security.|
|Age||Minimum 18 years|
Banks grant loans against various types of liquid securities. The Loan against Securities is similar to a personal loan against your liquid assets. However, it differs from a personal loan in many respects.
Borrowers can avail loans against various types of securities:
Almost all public and private sector banks offer loans and overdrafts against shares. State Bank of India is one of the premier banking institutions in India. The bank has an excellent loan product Loan against Shares.
Not all people invest in shares. A vast majority of people use the mutual fund investment route, as well. One can avail loans against these securities, as well. HDFC Bank has an excellent product, where digital loans are available against mutual fund investments.
Your Life Insurance policy can also come handy in times of emergency. Almost all banks offer loans against LIC policies. Many nationalised banks and private sector banks provide loans against LIC policies. Central Bank of India has an excellent loan product against LIC policies.
The National Savings Certificates are useful instruments that can fetch you personal loans in an emergency. Almost all banks offer loans against NSC. Similarly, your Kisan Vikas Patra and Indira Vikas Patra can help you get easy loans in an instant. Bank of Baroda has an excellent loan product in this regard.
a) If the residual maturity of the NSC is less than three years: 15% of the face value of the certificate
b) If the residual maturity is three years or more: 20% of the face value of the security
Processing fee 500
Government bonds are excellent instruments for investment because you get assured returns on them. Besides, you can pledge these bonds and raise funds in an emergency. Kotak Mahindra Bank has a user-friendly product in this connection.
The objective of the loan
Features of the loan
A loan against fixed deposit is probably the most accessible loan you can have from a bank. It is one of the best ways to raise funds in an emergency without digging too much into your savings.
Loan against security is the most straightforward of all the loan products in the financial industry. Banks have a simplified documentation procedure when it comes to loan against securities.
Usually, banks offer loans against securities to existing account holders. Therefore, there is no need for KYC documents. The applicants can be ready with the documents pertaining to the securities.
Now get Navi personal loan of Rs. 10,000 to Rs. 20 Lakhs at lowest interest rate starting from just 9.9% per annum. Repay in easy instalments of 3 to 72 months. The processing fee ranges from 2.5% to 6% of the sanctioned limit + GST.
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Borrowers can avail demand loans, term loans, and overdraft facility against securities. The overdraft is the most convenient because it allows you to save on the interest component. However, you should ensure to service the interest every month to ensure smooth renewal of the OD facilities annually.
Loans against securities differ from personal loans in these aspects.
Personal loans are similar to loans against security. The bank does not ask for the end-use of funds in the case of both these loan facilities.
It depends on the bank’s internal policies. Usually, banks allow loans against third-party securities but at a higher rate of interest.
No, the term insurance policies do not have any surrender value. Banks offer loans only against endowment insurance policies. Such policies have a surrender value.
Any endowment life insurance policy that has run for a minimum of three years has a surrender value. The surrender value is a proportion of the premiums already paid.
The policy should be kept alive during the pendency of the loan. Hence, it is essential to keep paying the premiums on time. It does not let the policy to lapse.
Banks keep track of the value of the shares when they offer loans against shares. Secondly, the bank stipulates a 50% margin on such loans. Hence, banks have sufficient time to sell the shares and recover the amount they have lent.
The bank takes the following precautions when sanctioning the loan against securities.
There is no upper age limit, but the borrower should be a minimum of 18 years to avail these loans.