Loan Against Securities

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 Against Securities Details

Loan amountUp to 90% of the value of security
Rate of interestVaries from lender to lender
TenureDepends on the customer's requirement and remaining tenure of security.
AgeMinimum 18 years
  • Life Insurance Policies
  • National Saving Certificates
  • Kisan Vikas Patra and Indira Vikas Patra
  • Shares
  • Mutual Fund Investments
  • Government Bonds
  • Against fixed deposits

Loan Against Securities a Kind of a Personal Loan

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.

Similarities Between Loan Against Security and Personal Loan

  • Both personal loans and loans against security are available at short notice, almost instantly.
  • The banks do not seek the reason for applying for such loans.
  • The borrower can use the funds to meet all kinds of financial emergencies.

Distinctions Between Loan Against Security and Personal Loan

  • Personal loans do not require the borrower to provide any collateral. They are clean and unsecured loans.On the other hand loan against securities are secured loans because the borrower pledges the securities with the bank when availing this loan.
  • There are specific eligibility norms for personal loans. The loans against securities are available to all, provided they offer liquid and marketable securities.
  • Being a clean advance, the rate of interest on a personal loan is higher than that of the loan against securities.
  • A borrower should have a minimum CIBIL score for availing a personal loan. There are no such specifications for loans against securities.
  • Personal loans are usually in the form of term loans repayable in EMI. The borrower can avail the overdraft facility in the case of loan against securities.

Different Types of Securities Against Which Loans are Available

Borrowers can avail loans against various types of securities:

  • Life Insurance Policies
  • National Saving Certificates
  • Kisan Vikas Patra and Indira Vikas Patra
  • Shares
  • Mutual Fund Investments
  • Government Bonds
  • Against fixed deposits

Loans Against Securities Benefits

  • Loans against securities are readily available with all banks.
  • This facility is a loan against your money.
  • Ideal facility to raise funds in an emergency
  • The facility of an overdraft, thereby enabling you to save interest
  • Can prepay at any moment without incurring any penalty
  • Available at rates of interest that are better than that of personal loans
  • Loans available up to 80% to 90% of the security value
  • No need to have an excellent CIBIL score to avail this facility
  • Can use the funds for any purpose
  • Digital loans available against shares and mutual fund investments

Different Types of Loans Against Securities

Loans Against Shares

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.

The objective of the loan

  • Loan against shares to meet unforeseen emergencies
  • Loans up to 20 lakhs to meet contingencies like medical expenses, other personal needs, and even subscribe to a new issue of shares

Features of the loan

  • Loans available for meeting all contingent expenses like medical expenditure, marriage, education, purchase of a house, and even subscribe to rights issue or purchase new shares
  • The facility is not available for indulging in speculative activities like racing, gambling, and so on. This loan is also not available for making intercorporate investments or acquiring an interest in companies.
  • The minimum loan amount is 50,000.
  • Maximum  20 lakhs
  • If subscribing to an IPO, the maximum loan permissible is 10 lakhs
  • Margin requirement  50% of the market value of the shares
  • Security  Pledge of the Demat shares against which you take the loan
  • Processing fee  0.75% of the loan amount with a minimum of 1,000. In the case of an overdraft facility, the processing fee is 1,000.

Eligibility Criteria

  • Existing individual customers having a satisfying relationship with State Bank of India.
  • The applicant should maintain a Demat account with SBI Cap Sec.
  • Joint borrowers not allowed
  • Loan available as an overdraft or demand loan
  • NRIs are not eligible for a loan against shares

Rate of Interest

  • Loans against shares  One-year MCLR plus 2.50% = 7.90% + 2.50% = 10.40%

Repayment Tenure

  • Demand Loans Maximum period of 30 months
  • Overdraft 30 months subject to annual renewal

Loans Against Mutual Fund Investments

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.

The objective of the loan

  • Digital loan against mutual funds to enable people to meet emergency requirements while continuing to ear good returns

Features of the loan

  • Funds available in the account within ten minutes
  • This facility is available against both debt and equity mutual funds
  • The borrower retains the mutual fund portfolio without liquidating it
  • Continue to earn good returns on the investment
  • Ideal loan product for first-time borrowers without any credit history
  • As it is an overdraft facility, you pay interest on the amount utilised
  • Available across the country on the HDFC Bank website
  • Sanction of new loans and enhancements done online

How to apply

  • Log in to the myCAMS portal through the HDFC Bank website
  • Select the mutual funds you wish to pledge from your profile
  • Click on the Terms and Conditions and go through them
  • You get a one-time-password on your mobile. Input the OTP to activate the overdraft account.

Eligibility Criteria

  • Both Indian residents and non-resident Indians are eligible for a loan against mutual funds.
  • Non-individuals are also eligible for this loan
  • Minor cannot apply for this loan facility.
  • Applicant should have HDFC Savings bank account with the mode of operation as single.
  • Customers should have a net banking user ID
  • Mutual fund holding with CAMS as the Transfer agent
  • Joint loans not allowed
  • Mutual Fund holding as Single

Margin requirements

  • Maximum loan up to 80% of the value of the mutual funds


  • Annual Maintenance Charges: Up to 0.50% of the limit with a minimum of Rs. 1,000 and a maximum amount of Rs. 5,000.
  • Processing Fee: Rs. 1,499 for digital cases and up to 1% of the loan with a minimum of Rs. 3,500 for manual cases.
  • Fee on the Enhancement of Loan: Rs. 1,499 for digital cases and 0.50% of the credit limit with a minimum of Rs. 500 for non-digital loans.

Loans Against LIC Policy

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 objective of the loan

  • Personal loan against your LIC policy to meet your urgent requirements.

Features of the loan

  • Easy loan option against your LIC policy.
  • Loans available between 75% to 90% of the surrender value of the LIC policy.
  • Loan available in the form of demand loan or overdraft account.
  • Attractive rates of interest that are much below that of the personal loans.
  • Facility to close the loan anytime without incurring any penalty.

Eligibility Criteria

  • Existing customers can avail the facility of loan against LIC policy.
  • No credit rating required for the processing of this loan.
  • Should not be a loan defaulter in the bank.
  • The policy should have a surrender value.
  • The customer should have paid the latest premium and continue to keep paying the premiums.

Loan quantum

  • 75% to 90% of the surrender value of the LIC policy.


  • Assignment of the LIC policy in favour of the bank.

Loans Against NSC/KVP/IVP

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.

The objective of the loan

  • Helps the borrower to get access to funds in an emergency by pledging their NSC, KVP, or IVP certificates

Features of the loan

  • Facility available as a demand loan, term loan, or an overdraft
  • The margin on the loan

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

  • Minimum loan: Rs. 3,000
  • Minimum overdraft: Rs. 20,000
  • Repayment allowed in easy EMIs in the case of term loans.

Rate of Interest

  • Loan  BRLLR + SP plus 3.50% or 0.50% more than the rate offered on the NSC/KVP whichever is higher.
  • Overdraft  BRLLR + SP plus 4% or 0.75% more than the offered rate on KVP/NSC, whichever is more.

Processing fee  500


  • Pledge of the NSC/KVP/IVP
  • Banks lien marked on the certificates at the respective issuing post office.

Loans Against Government Bonds

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

  • Instant loan facility to cater to any financial emergency

Features of the loan

  • Instant liquidity available
  • Competitive rates of interest
  • Overdraft facility available where you save interest
  • Online access to funds
  • Tenure of 12 months on a renewable basis
  • Multi-city banking facility
  • Loans available against bonds in dematerialised form alone

Eligibility Criteria

  • Resident Individuals aged 18 and above can apply
  • Salaried and self employed persons
  • NRIs are also eligible
  • Non individuals are also eligible
  • Minimum loan amount Rs. 3 Lakhs
  • Maximum loan amount Rs. 20 Lakhs
  • Loan To Value Ratio  85%

Loans Against Bank Fixed Deposits

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.

The objective of the loan

  • Access to immediate funding in the event of an emergency.


  • Get 90% of the FD amount as loan or overdraft.
  • Interest @ 1% more than what the bank offers on the deposit.


  • Individuals and non-individuals having a fixed deposit in the bank.
  • Joint loans permitted against a deposit in joint names.


  • The banks do not charge any fee for providing loan against fixed deposits.

Loan Against Securities Documents

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.

  • Loan application form
  • Demat account statement
  • Original share certificates in the case of offering shares in its physical form
  • Original LIC policy along with the surrender value certificate
  • Original NSC/KVP/IVP certificates duly discharged in bank’s favour
  • The original fixed deposit receipt

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Loan Against Securities FAQs

What types of loans are available against securities?


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.

How do loans against securities differ from personal loans?


Loans against securities differ from personal loans in these aspects.

  • They have a comparatively lower interest rate.
  • The eligibility criteria are the most simplified of all.
  • There is no penalty of foreclosure of such loans.
  • These loans are available as demand loans and overdraft facilities.
  • The applicant does not need any credit score to avail this loan.

In what way are personal loans similar to loans against security?


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.

Can you avail a loan against third-party security?


It depends on the bank’s internal policies. Usually, banks allow loans against third-party securities but at a higher rate of interest.

Does the bank give loans against the term insurance policies?


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.

What is the surrender value of a life insurance policy?


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.

Why is it necessary to keep paying the premiums of the life insurance policy when you take a loan against it?


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.

What will happen if the value of the shares goes down during the pendency of the loan against shares?


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.

How does the bank mark its charge over the securities?


The bank takes the following precautions when sanctioning the loan against securities.

  • Against Shares: Banks take a blank transfer form for transferring the shares to their name.
  • Against Mutual Funds: Bank marks its lien over the funds.
  • Against LIC Policy: Bank gets the policy assigned in its favour.
  • Against NSC/KVP/IVP: Bank registers the lien in its favour with the respective post office.
  • Against Government Bonds: Bank marks its lien over the bonds with the issuing department.
  • Against FD: Bank marks the lien on the FD. 

Is there any age limit for availing these loans against security?


There is no upper age limit, but the borrower should be a minimum of 18 years to avail these loans.