Loan Against Securities: Top Documents Required

Summary

Requesting a loan against securities involves a straightforward procedure, and the necessary documentation for this loan is similarly uncomplicated and clear-cut. In this article, we've outlined the fundamental eligibility criteria and the required documents to facilitate a seamless process.

You have encountered a life emergency and now you’re thinking of selling your shares. Well, don’t! Rather, we suggest that you consider a Loan against your Securities (LAS) rather than selling them. Let us explore this concept further in this blog. 

What is a Loan against Securities?

In short, LAS is a loan provided to a customer in exchange for pledging collateral. This collateral can be insurance policies, mutual funds, National Savings Certificates or KVP, and various other securities such as demat shares and non-convertible debentures. 

LAS has gained popularity in the past few years, and for good reasons – relatively low interest rates and processing rates as well as the freedom to set your own loan limit to name a few. 

Like all other loans, it requires certain documents to be processed successfully. No doubt this loan has its fair share of benefits that warrant its popularity. However, not everyone can apply for this loan. There are criteria for eligibility that you must fulfil and documents that you must possess to avail of this loan. 

In this article, we shall discuss these criteria and list down the required documents.

Eligibility criteria for LAS 

To apply for a loan against shares or securities in India, you must 

• Be a resident of India
• Be a minimum of 21 years old and not older than 65 years of age
• Have proof of a stable source of income (salaried/ self-employed)
• Have a savings, current and most importantly, a Demat account
• Have a shares portfolio of more than INR 50,000 
• A good CIBIL score of at least 650 or higher

Please keep in mind that these are only basic eligibility criteria. The actual eligibility will depend on a number of other parameters. The two most crucial requirements to be met are: 

1. the type of security and 
2. the value of the shares utilized as collateral. 

Documents required for LAS

The documents required to apply for an LAS are pretty basic. 

Individual borrowers must provide:

• A recent photograph of yourself for the application form
• PAN ID or number
• Proof of identity. This can be your Aadhaar/ Voter’s ID/ Passport/ Driving license (in line with KYC)
• Proof of address
• Proof of bank account
• Proof of demat account
• Proof of securities such as demat or mutual funds holding statement
• Proof of income

Nowadays, you can seamlessly complete your application for a LAS online if you meet the eligibility criteria and have all the documents required. 

A quick note about lenders

The lender will assess your application, documentation, and your overall creditworthiness prior to granting approval for your loan application. This process includes:

• Conducting a credit rating check to evaluate your financial profile
• Performing a security analysis of the tradable financial assets you intend to use as collateral, and determining their appropriate value based on market fluctuations.

Also keep in mind that lenders provide loans based solely on specific investment instruments, such as Insurance Policies, Non-convertible Debentures, NABARD Bonds, UTI Bonds, Mutual fund units, Demat Shares, and National Savings certificates or KVP (in Demat form). 

It's crucial to consult your lender's list of acceptable collateral before applying for a loan.

Applying for a loan against securities

Nowadays with everything getting digitised, you can easily apply for a loan against securities in a matter of minutes via a digital platform.

Digital platform or online

In today's digital age, nearly every bank in India offers the convenience of applying for a loan against securities online. The entire process is quick and hassle-free. You can visit the official website of the bank or lender from which you intend to obtain the loan and click on the 'Apply Now' button. You will be required to provide the lender with the necessary details and upload the required documents. After the bank verifies the information and documents you've submitted, the loan amount will be transferred to your bank account.

Going old school or offline

Alternatively, you can personally visit the nearest branch of the lender from whom you wish to obtain the loan, bringing along the necessary documents. A bank representative will then guide you through the process of applying for a loan against a securities scheme.

Summing it up

To apply for LAS you need the following documents

• Proof of identity in line with KYC
• PAN
• Proof of bank account and demat account 
• Demat/mutual fund holding statement
• Proof of income
• Proof of demat account
• Recent photograph of yourself

To be eligible to apply for LAS you need to meet the following criteria 

• Be a citizen of India
• Older than 21 years of age and younger than 65
• Own a shares portfolio of more than INR 50,000
• A CIBIL score of at least 650 or higher

LAS is a great way to secure liquid funds without having to sell your assets. However, you must know the requisites, both in terms of documents as well as eligibility criteria to make the most of it. Consulting a financial advisor remains the best way to ascertain your eligibility and compatibility with LAS.