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Demat Trading
All about loan against demat shares
A loan against demat shares is a loan that can be availed by pledging securities held in a demat account as collateral. A demat account is an electronic account that holds stocks, bonds, mutual funds and other securities in a digital format.
In a loan against demat shares, the lender provides a loan against the value of the securities held in your demat account. You continue to hold the shares in the account, but the lender has a lien on them until the loan is repaid. The loan amount can range from a percentage of the value of the pledged securities , depending on the policies of the lending institution.
Axis Bank is a leading bank in India that provides loans against shares and securities, including demat shares. The bank offers a range of loans against shares that can help you meet your financial needs without selling your investments.
Things to keep in mind before availing a Loan Against Demat Shares
- Eligibility Criteria: If you are an Axis Bank savings or current account holder, you can easily apply for a loan against shares online. Axis Bank offers loans starting from a minimum of ₹25,000 for equities to a maximum of 20 Lakh . One of the significant benefits of Axis Bank's LAS 24x7 is that there are no prepayment penalties if you decide to pay off the loan early. Please note that if you are planning to pledge shares, you need to have a demat account with Axis Securities Limited.
- Loan Amount: The loan amount that can be availed through a loan against demat shares depends on the value of the securities held in the demat account. The loan amount can vary between lenders, and it's important to check the loan amount that can be availed before applying.
- Loan Tenure: The loan tenure that the customer can opt for is one year..
- Risks Involved: While a loan against demat shares can be a convenient way to obtain funds, it's important to understand the risks involved, such as a fall in the market value of the pledged securities. This may result in a margin call from the lender or the possibility of a default, leading to the loss of the pledged securities.
- Fees: Lenders may charge processing fees.. It's important to understand these charges and factor them into your decision.
- Loan Repayment: Before availing of a loan against demat shares, it's important to have a repayment plan to ensure the loan can be repaid on time. Failure to repay the loan on time can result in the loss of the pledged securities.
Also Read: [Loan Against Securities: What are they and why are they beneficial?]
Benefits of Loan Against Shares
A loan against shares can be a better option than other available sources of credit. Loans against shares offer several advantages, including low interest rates, quick processing, flexibility, and high loan amounts.
One of the most significant benefits of loans against shares is the lower interest rates compared to other types of loans, such as personal loans or credit cards. Lenders view the shares held as collateral as a relatively safe investment, which may result in lower interest rates. Moreover, loans against shares are usually processed faster than other forms of credit, making them a quick source of funds.
Loans against shares are more flexible than other forms of credit, you can use them for your personal and financial needs Additionally, you retain ownership of the securities while using them as collateral, which means you can continue to benefit from any appreciation in their value.
Another advantage of Axis Bank's loans against securities service is that it has no prepayment penalty, which allows you to pay off the loan early without incurring any additional charges or fees. Loans against shares may also provide you with a higher loan amount compared to other forms of unsecured loans.
Summing up
Axis Bank offers a range of loans against shares, including Axis Bank's Loan Against Shares and Securities and Axis Bank's Loan Against Mutual Funds . These products allow borrowers to pledge their shares or mutual fund units as collateral and avail of loans at attractive interest rates and flexible repayment options.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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