The market’s volatility frequently creates winners as well as losers. For such a case, what if one requires urgent funds.
Yes, indeed. Numerous financial institutions provide personal loans in Noida against securities for customers’ short term funding requirements. Loans against shares, government bonds, insurance policies, as well as various kinds of investments come under such a category, to give people the opportunity to fulfill such dreams without liquidating their investments.
However, such as any other things, a loan against securities has its advantages and disadvantages. Following are some crucial points to assist to make an informed decision.
The Advantages
Lower interest rates
A Personal loan in Noida against any kind of securities of any type has a reduced rate of interest than most unsecured loans as well as the credit cards, as it is for a secured loan. This also means borrowers can gradually pledge the shares as collateral for availing a loan. Based on the stock list, a loan against shares’ rate of interest can further go as low as 10.5%. Prior to availing a loan, one must compare the low-interest rates of a loan against shares as well as to choose the one that perpetually suits the needs and requirements.
Flexible repayment options
There are two kinds of repayments options for a loan against any securities:
- Overdraft Demand
In an overdraft facility, the lender limits the borrowing against shares pledged. One can gradually choose to borrow any amount within a certain limit. The interest will depend on the amount of loan borrowed as well as the tenure. In addition, the limit is revised almost each year to easily adjust the loan against the present-day value of shares.
Henceforth, if the value of such stocks rises, one limit on the loan against shares will also elevate. Under such a scheme, lenders also offer the option of repaying only the rate of interest almost each month, allowing to repay the larger amount such as principal at the end of the tenure of loan.
The demand facility allows us to borrow the whole loan amount at a single time. The overall repayment amount including principal + interest is divided into EMIs throughout the tenure of a loan.
Continued returns and dividends
In such a case of loans against securities, the units remain invested in these markets, as well as one can avail all the advantages of these investments. Whether it is a case of dividend from preference shares or an interest income from a bond, the lender has no authority over such payments. One can also continue to receive gains from these investments as long as one must not default on these repayments. They can utilize this extra income to pay off the EMIs or save for the upcoming future.
Easy processing
For the process of any income proof or credit score, it cannot determine the loan against shares eligibility. As these are secured loans, the lender defines the loan against shares rate of interest, tenure, as well as other kinds of specifications entirely based on the stock list as well as its value.
The Cons
Low loan to value
The lender will further decide the loan against securities’ rate of interest, amount, as well as the tenure entirely depending on the value of the securities pledged. Typically, it amounts to up to 60-80% of the overall collateral’s value. This can possibly be a setback for those who generally want a greater amount or have low-priced stocks.
Cannot sell shares
In a scenario of loan against equity shares, not being able to sell the shares at the right time can be a con for shareholders. If a share value reduces drastically, it can predominantly lower the portfolio’s worth. The lender can then gradually reduce the loan against shares’ maximum limit as well as in repaying some amount from the principal. One can gain full authority over the investments post repaying the loan overall.
Not suitable for home loans
Typically, the Personal loan in Noida against the securities rate of interest is almost 2-3% higher than a home loan. Adding further to this, in this real estate market, a borrower will require the loan to cover a greater portion of such a property’s cost. According to these various restrictions on such loans against shares eligibility criteria, one would essentially require an extensive portfolio of high-value stocks to necessarily borrow such a greater amount.
Stocks should match the lender’s list.
A lender can gradually offer a loan against equity shares on only some of these stocks that are involved in the lender’s official list. This is also done to highly maintain the overall credibility of the required stocks pledged by borrowers. If such a portfolio has shares of companies that are not exuberantly listed with the lender, there is an increased chance that such a loan application will be then rejected. Thus, it is always highly advisable to check the list prior to discussing other kinds of details such as a loan against shares’ rate of interest, overall amount, as well as the tenure.
