Taking a loan is a very tedious job. To look for the loan that perfectly suits your needs is another big worry when you look for it. Taking suggestions from your friends and relatives for the perfect loan is the idea that most of you follow but finally end up with a taking loan from the advice of an aggressive executive from the loan department and end up with a loan that doesn’t actually meant for your needs. The executive may sometimes convince you with a personal loan describing lots of advantage of such loans which at that time may not be the perfect option for you. So it is of paramount importance for you to know the loan that perfectly suits your needs.
Loan against Securities
Most people are not well aware of the loans against securities. Such loans are offered by almost all the banks at interest rates of 12 to 15 per cent. Now it is very important to understand the facilities such a loan will offer you and the extent to which this loan fits your requirements. The most important facility such loans offer you is the time duration within which you can have such loans. Obviously the loan amount will matter on the shares and securities you have invested in. The highly valued shares will help you fetch more loans. Another big advantage of such a loan is there are no pre-payment charges involved. Again the interest that you need to pay is just the amount of loan that you have used. Also such a loan offers you with the facilities of over drafting.
Comparing Personal loan & LAS
Let’s put a comparison between a personal loan and the loan against securities. While Personal loans are based on EMI and the EMI is paid on loan disbursement. Loans against securities are paid after the utilization of the sanctioned limits and the interest are paid for the duration of which the loan is used. So this is absolutely clear that such a loan requires investing in valued stocks, securities and Mutual funds previously. Selecting the best option not only does multiply your money but it also helps you in getting easy and high amount loans. Again such a loan generally doesn’t have any prepayment penalty. You can also check with you bank about this as most of the banks offers such facility.
People often take a misuse of such loans by investing in the stocks and shares again by taking such a loan. As per analysts this practice should be avoided. As per RBI guidelines twenty lakh rupees can be offered for such loans. The minimum amount for such a loan is one lakh rupees. The drawback that such type of loan suffers is during the market instabilities. In case of fall of the stocks it becomes mandatory for the borrower to fund the account. So this is a very important drawback of such a loan. Borrower should know his extent of how much he can pay the loan in case of such instabilities. But the Coin has the other side too. In case of any appreciation of the borrower’s stock the bank offers enhanced limits for the Loan too. So analyzing the market properly is a big role to play when you are looking for the loans against securities.
What is better where?
Now as you are clear with the pros and cons of such a loan, let us check the exact time to opt the loan against securities. If you need urgent liquidity- opt for such a loan. If you feel that you will need a short time to repay the loan go for it. So it’s very important to estimate you returning capability. Also look for the rate of interest of such a loan. If you find the rate of interest of such a loan lesser that the other prevailing ones- go for it. If need a loan for a very short duration and if you have highly valued shares, looking for the loans against securities is a good option.
Now-a-days more and more banks are offering such loans. A detailed study will help in getting the perfect loan and most importantly analyze the market properly. Because taking a loan against your securities and then making big repayments for the fall of your stocks and securities makes no use. Rather it worsens things for you. Check the various charges such as one-time fee, processing fees, renewal charges, service taxes and government levies. After all these detailed studies, opt for the loan against securities. Also never pledge the shares to get a loan. If it is absolutely necessary go for it but keep this thing in mind that you should pay it back as soon as possible.
