Tips to Qualify For Availing Loan Against Securities

Loan Against Securities (LAS) provides an easy way to get funds for urgent financial needs without selling your investments. You get the loan as an overdraft so you can access funds quickly and have to pay interest only on the amount used from the overdraft account. Read this blog post to learn about practical tips to increase your likelihood of qualifying for Loan Against Securities.

What is Loan Against Securities?

Loan Against Securities (LAS) allows you to pledge various types of financial assets as collateral to borrow funds quickly. Instead of selling your investments, you can use securities such as shares, Mutual Funds, insurance policies, Sovereign Gold Bonds (SGBs) and more to secure a loan. This type of loan enables you to meet urgent financial needs without selling your investments. ICICI Bank offers LAS as an overdraft facility, so you just need to pay the interest on the utilised amount and for the duration it was used. This makes LAS a convenient and cost-effective loan option.

Tips to Qualify for a Loan Against Securities

Understanding the key factors that can improve your eligibility and streamline the approval process can help you easily qualify for a Loan Against Securities. Here’s a checklist to help you.

1. State the Purpose of the Loan Clearly

Make sure you explain why you need the funds. Lenders like to understand the purpose behind your loan request, as it helps reassure them that you have an urgent and valid requirement of money. Whether you need funds for renovating your home or for covering business expenses, clearly state your purpose with honesty and clarity, as this can boost your likelihood of getting loan approval.

2. Ensure Your Collateral is Eligible

The value of investments you offer as collateral will greatly impact the loan amount you can secure. Not all stocks, Mutual Funds and securities can be used as collateral. Lenders have their lists of accepted securities; hence, confirming if your investments align with the lender’s criteria is crucial. Make sure to review your securities before you apply for a loan. ICICI Bank offers a list of approved assets so that applicants can easily check their eligibility.

3. Maintain a Good Credit Score

While a secured loan like Loan Against Securities doesn't necessarily require a credit score for approval, having a good credit score can enhance your likelihood of approval. A solid credit history signals to lenders that you are financially reliable and able to repay the loan as agreed. Consider working on your credit score before submitting your loan application to enhance your likelihood of securing favourable terms.

4. Ensure Correct and Complete Documentation

Before you apply for a loan, the lender will need paperwork to confirm who you are & where you live and to verify your ownership of the securities used as collateral. Make sure you have all the required documents ready in advance to avoid any delays. Common documents include:

• Proof of address (such as an electricity bill or rental agreement)

• Proof of income, such as salary slips or bank statements

• Your Demat Account statement or proof of ownership of the securities.

5. Choose the Right Loan Amount and Tenure

With ICICI Bank, the amount you can borrow is based on the value of the assets you pledge. You can get up to 50% of the value of your pledged shares as a LAS. If you are pledging Mutual Fund units, you can get up to 50% of the NAV of Equity Mutual Funds and up to 80% of the NAV of Debt Mutual Funds. Since LAS is an overdraft facility, you pay interest only on the amount you use and for the duration it is used. This makes it crucial to borrow only what you need and only for the time you need it.

6. Keep a Check on the Loan Terms

Always read the loan terms clearly before committing to any loan offer. This is important as it can save you from paying extra charges or penalties later during the loan tenure. It's helpful to be aware of the interest rate, whether it is fixed or floating. Fixed rates remain constant throughout the loan, while floating rates may change based on market factors.

Conclusion

Getting a loan without selling your securities is now easy with Loan Against Securities. Follow the tips above to increase your chances of qualifying and receiving favourable loan terms.

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