What is a Loan Against Securities: How It Works?

Published on September 02, 2025 | 6 min read

Key Takeaways

A Loan Against Securities (LAS) is a secured loan where you pledge assets such as shares, mutual funds, or bonds as collateral without selling your investments.
The lender approves a credit limit based on the market value of your pledged securities. You can withdraw funds as needed and pay interest only on the amount you use.
LAS often offers faster processing and disbursement, potentially within 24 hours, making it useful for emergencies and short-term financial needs.
Your investments remain yours while pledged, and you may continue receiving dividends or interest, subject to the terms of the arrangement.

Financial emergencies can arise when we least expect them, and our first instinct is often to dip into our savings or sell investments to meet immediate needs. While this may provide temporary relief, it can disrupt long-term financial goals and leave us with a smaller safety net for the future. But what if you could access funds when you need them without selling your investments? This is where a Loan Against Securities (LAS) comes into play.

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It allows you to pledge eligible financial assets, such as shares, mutual funds, and bonds, as collateral to secure a loan while retaining ownership of your investments. In this article, we’ll explore how a Loan Against Securities works, its key benefits, and the important factors to consider before applying.

What Is A Loan Against Securities (LAS)?

A Loan Against Securities (LAS) is a type of secured loan in which you pledge your financial assets as collateral. It usually includes securities such as shares, mutual funds, or bonds. To access funds, you do not have to sell them. This facility offers liquidity while allowing you to retain ownership of your investments.

Key Features:

As you still own the securities, you continue to earn dividends or interest on the securities that are pledged.
Funds are usually offered as an overdraft or a line of credit.
Interest is charged only on the amount utilised, not the entire sanctioned limit.
Quick processing with minimal documentation.
There is no need to break long-term investments during emergencies.
Loan-to-Value (LTV) ratio is generally capped at 50–65%.
Margin calls may be raised if the market value drops.

Common Securities Accepted by Major Institutions

Security Type	Accepted by Banks	Accepted by NBFCs
Equity Shares	Yes	Yes
Mutual Funds	Yes	Yes
Bonds & Debentures	Yes	Yes
Insurance Policies	No	Maybe (selectively)

How Does It Work?

Obtaining a Loan Against Securities is a straightforward and expedited process, often completed online with minimal paperwork. The loan is provided by pledging your financial assets, and funds are made available almost instantly.

When you pledge your securities, the lender temporarily holds them as collateral. In return, you receive access to a line of credit or overdraft account. The loan limit is determined by the market value of the pledged securities, and you are charged interest only on the amount actually used.

Key Highlights

The loan is sanctioned as a percentage of the current market value
Your limit may be reduced if the value of securities drops
You pay interest only on the amount withdrawn, not the total limit

To help you better understand, here’s a breakdown of how the process works:

Choose A Lender

Select a bank, NBFC, or broker that offers LAS and accepts your type of securities.

Submit Application

Apply online or offline with KYC documents and details of your holdings.

Pledge Securities

Your investments are pledged digitally via your Demat or mutual fund account.

Loan Limit Is Approved

Based on current market value, a credit limit is set and linked to your overdraft account.

Use And Repay As Needed

Withdraw funds as required. Pay interest only on the amount utilised, not the total limit.

Benefits Of Taking A Loan Against Securities

Using a Loan Against Securities (LAS) offers several advantages, particularly when you need funds without compromising your long-term investments. Here are the critical benefits:

Benefit	Explanation
Quick Processing and Instant Liquidity	Most lenders offer fast approval and disbursement, often within 24 hours, making it ideal for emergency or short-term financial needs.
No Need to Sell Your Investments	You retain ownership of your securities and continue earning dividends or interest, even while they’re pledged.
Lower Interest Rates Than Personal Loans	Being a secured loan, LAS usually attracts lower interest rates compared to unsecured personal loans (the difference can be up to 6-10% per annum).
Easy Online Management	Most platforms offer complete digital control—apply, pledge, withdraw, and repay—all through a user-friendly online interface, especially with brokers like Upstox.
Interest Only on Amount Used	You pay interest only on the funds you actually withdraw, not the total sanctioned limit.

Top 5 Things To Keep In Mind While Applying For Las

While a Loan Against Securities (LAS) offers liquidity and flexibility, it's essential to remain vigilant and make informed choices to maximise its benefits. Here are five key tips to keep in mind:

Factor	Details
Choose the Right Lender or Financial Institution	Compare lenders on rates, accepted securities, and hidden fees. Choose one offering competitive terms and wide asset acceptance.
Maximise Variety and Select the Right Collaterals	Use stable assets with lower risk. Avoid highly volatile securities that may require frequent top-ups due to market fluctuations.
Consider Repayment Strategies	Plan repayment in advance. Opt for flexible options that align with your income flow and financial obligations.
Keep Required Documents Handy	Have your KYC documents, Demat account details, and income proof ready to expedite the loan approval process.
Be Wary of Hidden Charges and Fees	Always read the fine print. Be aware of processing, renewal, pledge, and transaction fees before signing; enquire about such charges.

A loan against securities (LAS) is a valuable tool, particularly when you require immediate funds, offering features such as lower interest rates compared to personal loans and no transfer of ownership. However, to ensure a smooth borrowing experience, it is imperative to exercise caution and stay well-informed about the specific rules and guidelines governing this financial arrangement.

FAQs

Can I apply for LAS jointly with another person?

Yes, joint LAS applications are allowed if both applicants co-own the pledged securities and meet the lender’s eligibility criteria.

Do I need a Demat account for LAS?

Yes, a Demat account is typically required to pledge shares or mutual fund units to a lender digitally.

Will LAS affect my credit score?

If you default or delay payments, it may negatively impact your credit score, just as with any other secured loan.

Is there a minimum loan amount for LAS?

Some lenders set a minimum LAS amount, typically starting from ₹50,000 to ₹1 lakh, depending on the institution.

Can NRIs avail of LAS in India?

Some banks allow NRI customers to avail of LAS against eligible securities, subject to FEMA guidelines and the bank's specific policies.

About Author

Sachin Gupta

Senior Sub-Editor

is a seasoned financial writer with over eight years of experience across global markets, including Australia, the UK, and New Zealand. He specialises in simplifying complex financial concepts, making them accessible and engaging for a wide range of readers. When he’s not writing or traveling, he can often be found exploring the mountains, drawing inspiration from the calm and clarity of the outdoors.