There are many times in people’s life when they need financial assistance. There are many types of loans provided by financial institutions, and the borrower needs to make a close look at the terms and get the required assistance from the best loan.
If the applicant or individual has an investment, then they have the option to take a loan against securities. Loan against securities is for the short term, and loan quantum is also low.
Loans secured by securities require the borrower to provide collateral as a security asset. It is used for different purposes, and there are many benefits of taking a Loan against securities.
How does the Loan against securities work?
Loans against securities are loans that are extended by financial institutions or banks. These are secured loans, where the securities are provided as collateral. The securities that are accepted as collateral include mutual funds, shares, FD, and insurance policies.
The value of the Loan relies on the securities value that you put together. The type of Loan is provided as an overdraft facility on securities once they are pledged with banks. The funds you require are withdrawn easily from the overdraft facility, and interest should be paid only on the withdrawal of funds.
Features of Loan against Securities
- You can easily get the Loan against securities from banks or financial institutions.
- The value of the Loan against securities depends upon the cash value of securities.
- Security must be easily transferable, marketable, and associated with preferred liquid assets.
- Security values are changed but not changed too much and kept in such a way that it does not make a loss.
- Loan against securities is provided as the overdraft facility.
- Tenure, flexible withdrawal, and repayment schedulesare offered on this kind of Loan.
- Internet banking and ATM facilities are available on overdraft facilities of loans against securities.
Benefits of Loan against Securities
- It is easy and quick to avail Loan against securities because the process takes less time to complete.
- The value of this Loan is less than the cash value of the investment in case the cash values are close to the outstanding loan value.
- The loan value lies between 50-90% of the collateral.
- The loan eligibility does not depend upon the credit score of the borrower.
- The flexible schedule of repayment is allowed, and it follows the routine EMI.
- The interest rate of a Loan against securities is lower than other types of secured loans.
- There is no pre-payment penalty levied on this type of Loan.
- Less processing charges and documentation is associated with loans against securities.
Loans against securities are the best choice if you want to get instant funds. It is the best alternative to selling a valuable investment at less prices. This Loan is effective in catering to short-term needs and those needs where the extra expenses or costs are not known.
The best thing is that the interest rate of a Loan against securities is less than secured or unsecured loans.