How to Use Your Shares to Get a Loan Easily
Your property, jewelry, and vehicle are tangible assets. During a state of financial necessity, you could use these assets to obtain funding by selling them or taking a loan against them. However, most people often forget that their investments are assets too.
These financial assets are usually in the form of shares, bonds, policies, mutual funds etc. You could easily convert them to cash by liquidating them or taking a loan against them too.
Why is a loan against shares a good idea?
Building a good portfolio of bonds, shares, and mutual funds takes a long time.
If you’ve been investing wisely, your securities could help grow your money for your future.
However, you also have the option to liquidate these assets for instant cash during a crisis.
Although you receive the capital to ease your situation, you could miss the potentially high-corpus that these investments would have gathered along the years.
Instead, there’s another option to avail instant money from your investments, without liquidating them.
You could apply for a loan against shares by offering your securities as collateral for the exchange of money.
Benefits of taking a loan against shares
Lower interest rates
Loan against shares interest rate is usually lower than most unsecured loans.
Since this is a secured loan where you offer the lenders the collateral for safekeeping, the lender gives you the benefit of a low-interest rate.
This reduces your EMI amount and affects the overall cost of the loan.
Usage flexibility
You could use a loan against shares for personal or business purposes. Most lenders are concerned about how you use the loan.
Once you meet the eligibility criteria of loan against shares, you get a certain percentage of the securities as a loan.
You then have the liberty to use withdraw from that amount as and when needed. The interest will be charged only on the amount you withdraw.
Instant loan
Secured loans are usually processed quickly as the lender doesn’t have to spend much time evaluating your creditworthiness.
When you apply for a loan against shares from financial institutes you get to access it online too.
There is minimal documentation needed, and you get a dedicated relationship manager to assist you with this instant loan.
How to turn your shares into a loan
You can approach a bank or a Non-Banking Financial Company for a loan against shares.
You’ll have to match the eligibility criteria, send the relevant documents and pledge your shares by signing an agreement.
The loan agreement is an undertaking that you are now offering your shares to the lender in exchange for funds.
From there on, you give the lender permission to possess the rights to claim your shares if you fail to repay the loan on time.
Although these shares will be pledged to your lender, you can continue to own the shares and benefit from them as the shareholder.
Once the lender has verified your application and processed the loan, the loan amount will be sent to your bank account.
You can access this amount anytime you want. You could even choose to withdraw it in parts, and the interest will be charged only on that sum.
Remember, your stocks are a valuable investment. You could liquidate them for instant cash but could lose their custody.
Instead, a loan against shares could prove to be a better option, as you get an instant loan to help you financially, and you can claim back your shares once you repay the loan.
Category: Personal Finance
