A loan against securities is the loan availed by pledging your equity holding, shares, insurance policies as collateral for a loan amount. This way, you will not have to sell off your shares while it is on the rise to get an amount. You can still get the loan amount to meet your short-term fund requirements without liquefying your assets.
When you take a loan against securities when the stock market is on the rise. You will be eligible for a higher loan amount. Additionally, since this is a loan against collateral, your loan against securities interest rates will be meagre.
Additionally, loans against securities are the best for emergencies as there aren’t any end usage restrictions involved for the loan. Hence it is best if you require a lump sum at a quick turnaround time.
Loans against securities are offered as overdraft facilities; hence you can always draw the entire sanctified limit according to your requirement. It also provides flexible repayment facilities until the expiry of the overdraft facility. And the interest rates charged until you repay the loan.
When the stock market is on the rise, most lenders offer you up to 60 % of the market value of the equity that is used as collateral.
So, it is always wise to take up a loan against securities as you could let your high-profit long term investments grow while you continue to receive the dividends during the loan period and avail 70-80 percent of the loan value.
Additional Read: Loan Against Securities During Rises in the Stock Market
