Taking a loan against securities can help you avoid loss caused by the premature withdrawal of your investment. You will not only have to bear an exit charge, but you will also have to give up ownership of your securities. So, it is best to exercise another alternative which is to take a loan against securities when faced with short-term needs.
This loan allows you to borrow funds against your investment without losing out on the profits, dividends and bonuses. This is because you are merely promising the securities to the lender for the duration of the tenor and not transferring ownership.
So taking a loan against securities is a very good way to finance needs in the present, especially when you know you’ll be receiving funds after a few months. Take a look at some of the instances where a loan against shares can be your ally.
When you need working capital until the next payout
A loan against securities can help you access funds up to Rs.10 crore depending on the value of the securities that you pledge. Additionally, you can avail these funds at nominal loan against securities interest rates. This is exceptionally useful when you need working capital for your business during a lean period, or during the off-season if your business is seasonal, or until a major payment comes through from a client.
Further, you can benefit from applying with NBFCs which offers you a Loan Against Shares at a competitive interest rate along with benefits like easy eligibility, minimal documentation, zero part prepayment and foreclosure charges, and a dedicated relationship manager. You can easily take this loan to finance inventory management, procurement of raw material and paying salaries or utilities, for instance.
When you have a medical emergency and are expecting funds shortly
When you have a medical emergency to finance, such as a surgery, it is possible that your top investments are only going to mature after a few months. During such a time, exiting the investment will cost you significantly. In such a scenario you can choose to pledge your financial securities to avail immediate funding and repay the same once your investments have matured.
Thus you will be using your securities to avail the best treatment, without losing out on the high returns that they will offer you shortly. You can also choose to repay your loan by selling the security you have pledged or selling a portion of it. Regardless of how you decide to repay the loan, remember that you can opt for a comfortable tenor of 3–12 months to repay it.
When you have to fulfil personal needs or wants at a short notice
You can take a loan against securities to fund a summer vacation in Europe while your children and spouse have a vacation, without waiting for your annual bonus that will come a few months later. Similarly, you can use a loan against securities for other reasons such as to pay for summer school for your children who are studying abroad or to renovate your parents’ bungalow before the onset of the monsoon. Whatever your financial need may be, a loan against securities can help you tackle it while securing your future by giving you a high loan amount quickly.
Remember to consider a loan against securities only when you are expecting funds in the next few months as the maximum tenor is that of 12 months.