A loan against shares is not a loan that people commonly opt for. Because borrower does not its benefits. This article highlights the top benefits of loans against shares.
In times of monetary woes, people often look to sell their assets. To avoid such circumstances, taking a loan against your securities instead of liquidating them is a much wiser option as you will still get the benefits of the assets, but they will be mortgaged as collateral for the loan amount.
Apart from this, there are many reasons why a loan against shares can be a good option to cover your financial needs. The following are some top benefits of loan against shares.
Benefits of Loan Against Shares
A loan against shares follows a very honest procedure and gives borrowers an opportunity to pledge their invested shares. Borrowers just need to complete a simple form, now all procedures are done through an online form as well.
Apart from shares, there are other forms of securities which borrowers can set up as collateral. These securities include:
FMPs (Fixed Maturity Plan)
IPOs (Initial Public Offering)
ESOPs (Employee Stock Ownership Plan)
Once you have done this, there is a verification procedure on the lender’s side that will determine your assigned loan amount based on the value of shares pledged.
Quick Financing Alternative
As mentioned previously, selling savings or assets in a time of financial crunches can be an easy, but surely not a sustainable decision in the long run. Availing a loan against shares can be a quicker method of financing as it has instant approvals. The approval period, due to the verification process, takes 24 hours. After this, the loan amount is given to your account in a span of 48 hours.
Higher Value, Greater Loan Amount
Over the course of your loan period, the value of your shares is evaluated periodically to see any appreciation or depreciation in their price. In case of depreciation, the borrower must reimburse by pledging more assets. In the case of an appreciation, however, shares draw money increases. Due to the increased value of the securities, you will be able to a larger sum of money which can enable more financing.
Loans against shares come with flexibility in varied areas. One of the main deeds of any individual when taking a loan is the interest rates to this, lenders also give borrowers the option to pay off their debt in advance and many do not charge a prepayment penalty. This way, you can pay back your loan and get your securities.
Interest Dependent on Amount Used
It is a common misconception that in a loan against shares the interest is applicable to the entire value of the shares pledged. Loan against shares interest rates are relatively less due to securities in collateral. In adds many people from taking this loan as they expect large interest rates. This is much far from the truth. The interest is only paid on the amount you choose to use out of the stipulated amount assigned to you under the loan amount.
Although selling shares and stocks, bonds, and other assets seems like a feasible option. But taking a loan against securities has the two benefits of availing the advantages of your assets as well as getting funding through them. Lenders offer low-interest rates, flexible and convenient loan amounts, and loan tenure. The loan process is very easy and simple and can be availed in a very short period of time!