- AMFI Register Mutual Fund Distributor
- info@sahyadricapital.in
- +91 7506701362
Welcome to Sahyadri Capital
We are individually designed to meet clients’ needs as determined by personal consultations
and constant monitoring of their financial goals. Our approach is to counsel individual
clients, understand their profile, needs and concerns, build customized financial investment
portfolios.
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Registered Office
Office no 005, Yashdeep Building, Besides Pethe Hotel, Khed Ratnagiri (415712)
Loan against share & Mutual Funds
What is a Loan Against Shares (LAS)?
Loans against shares or securities are when you borrow money using things like stocks,
bonds or insurance policies as collateral. They're handy when you need cash fast for
personal or business needs. These loans can last from short to long term with repayment
periods of up to three years. The specific securities accepted and loan amounts vary by
lender with loans going up to Rs. 20 lakh.
Getting a loan against your shares helps you manage your money better. It stops you from
rushing to sell your shares when you need cash. The amount you can borrow is based on how
many shares you have and which bank you're borrowing from.
How does a Loan Against Shares work?
When you pledge your market shares the bank offers you an overdraft facility using those
shares as collateral. This means you can withdraw money up to a certain limit. The interest
you pay is only on the amount you actually withdraw not the total loan amount.
For example, if you borrow Rs. 2 lakhs but only withdraw Rs. 1.5 lakhs you only pay
interest on the Rs. 1.5 lakhs. Additionally, you can involve family members like your
spouse, parents or siblings above 18 by pledging their shares too. However, they need
to be co applicants and sign agreements. This arrangement provides flexibility in borrowing
and reduces interest costs, making it advantageous during financial crunches. It's important
to understand the terms and ensure everyone involved comprehends their obligations before proceeding.
What types of securities can be used as collateral for a Loan Against Shares?
For a Loan Against Securities various types of approved securities can be used as collateral including:
Equities:
These are stocks or shares of companies listed on the stock exchange. They are commonly
used for LAS due to their high market value and liquidity. However, their value can fluctuate
affecting the loan amount.
Mutual Funds:
These investment funds pool money from many investors to invest in stocks, bonds or
other assets. They offer a diversified portfolio and steady returns but are still subject to market fluctuations.
Fixed-Income Securities:
This category includes bonds, debentures and fixed deposits which pay a fixed
interest rate. They are less risky than equities but usually offer lower returns.
Exchange Traded Funds or ETFs:
These funds track a basket of assets like stocks or commodities and
trade on the stock exchange. They provide diversification, low costs and liquidity but their value can also be volatile.
Insurance Policies:
Some lenders accept insurance policies such as endowment policies, money back
policies or Unit Linked Insurance Plans or ULIPs as collateral for LAS.
Different securities can be used for LAS each with its benefits and risks including equities,
mutual funds, fixed income securities, ETFs and certain insurance policies.
Loans against Mutual Funds
Loan against mutual funds is a way to get instant liquidity against the mutual funds that
you own. It is best way to increase potential return on your investment and raise your
capital for short time financial requirement. The interest rate of loan against mutual
fund is lower than of personal loan.
Anyone can take a loan on mutual funds. This loans amount is upto Rs.150 crores and for an
extended tenure of 12 months. Some banks or investment firms provides mutual fund loans.
The loans can be utilized for fulfillment of any legal and legitimate purposes including
business loans, short term working capital requirements or meeting family obligations
like marriage in the family, higher education of self or children, medical expenses and so on.
