5 Reasons Why to Apply for a Loan Against Securities

loan against securities

When faced with a need for cash, especially during times of urgency, many people’s first choice is to sell their securities. Unfortunately, this often leads to the loss of potential gains that could be received from selectively curated securities. To make use of your finances more constructively and in a way that benefits you in the long term, it would be advisable to look for other options and ensure that you are making the best decision. In such cases you must go for Loan Against Securities.

You may realize that you do not want to sell your securities in the present and require resources to deal with an unexpected situation. One of the ways in which you may be able to make better use of your resources is to take a loan against securities. This may allow you to preserve the value of the securities you have collected for the future and let you deal with the urgent crisis through funds collected in the present. Therefore, researching all the available choices and making decisions based on factors such as loans against securities interest rates may be helpful. There are several reasons why taking a loan against securities might be a better option, some of which are listed below.

5 Reasons Why to Apply for a Loan Against Securities

  • Flexible loans offering high amounts

Securities are of many types, including mutual funds, employee stock ownership plans (ESOPs), fixed maturity plans (FMPs), initial public offerings (IPOs), bonds, and so on. Any of these can be used as collateral against which you can avail of loans. The amount of money offered against these tends to be higher, up to 10 crore rupees. Moreover, it is also flexible and free of restrictions regarding how you can use the funds. It is also a fast process to apply for.

  • A fast and smooth process

As mentioned before, you may think about using your securities during a crisis that you may not have been prepared for. Emergencies like hospitalizations require that you direct your funds towards it immediately, which may encourage you to sell your securities in panic. However, applying for a loan against securities is a relatively fast process that offers approval within a day. Moreover, the amount may be offered to you within two days of application. This does away with the need for selling your securities, whereas you could gain much more value from them in the future.

  • Future growth potential

When one curates securities, it is done with a lot of time and effort. An investment portfolio is usually created to make gains from it both in the short and long run. Making premature decisions, such as liquidating them before they mature, or doing so in an unsuitable market, may lead to loss of the value you could have attained from their growth in the future.

Taking a loan against securities enables you to let the securities earn their dividends and shares while you have access to the funds that you need at the moment. 

  • Making the best choice

Investment portfolios may feature all sorts of securities, and you may not feel comfortable pledging a certain security, while you may want to pledge another one. A loan against securities offers you the choice to pledge your bonds, but not your ESOPs, or vice versa, depending on which one would be more profitable for you. The only condition is that the security’s minimum value should be 10 lakh rupees. Apart from this, there is flexibility in terms of choosing one kind of security over the other.

  • Repaying the loan

The loan against securities interest rates ensures that you have an easy repayment term. You can choose terms of tenure (the maximum being 36 months). Financial institutions also allow you to prepay some amount of the loan or foreclose it to make the process more convenient.

Once you have decided on applying for a loan against securities, it is essential to find an appropriate lending institution and inquire about details like the interest rates, documents required, and so on. In addition, you might want to talk to an expert to understand your financial situation better, whether this loan would be suitable for you, which security to pledge, and which might offer more gains in the future. Finally, if you need the loan urgently, the fast nature of this process may be in your favor. Thus, loans against securities can be a solution for both your current needs and future profits.

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