A Comprehensive Guide to Secured Loans, Unsecured Loans, Loan Against Property, Loan Against Mutual Funds, and Business Loans - Everything You Need to Know

 

Loan Against Securities Smart Liquidity Without Selling Your Investments

Selling equities or mutual funds to raise cash, especially at lower market prices, can result in missing out on potential long-term returns that typically grow at 14-20%. A smarter way to unlock funds without selling your investments is through a Loan Against Securities (LAS). With LAS, you can obtain a substantial loan disbursement, typically at interest rates of around 9-10%, by pledging your securities as collateral. This allows you to access quick liquidity, preserve your portfolio’s growth potential, and avoid capital gains tax, making it an efficient and financially savvy tool for managing your cash flow.

1.      Unlock Liquidity Without Selling: Loan Against Securities (LAS) lets you convert your stocks, mutual funds, or bonds into cash without triggering capital gains tax or disrupting your investment strategy.

2.     Cost Advantage: Borrowing at interest rates of 9-10% against securities is financially smarter than selling equities or mutual funds that could be growing at 14-20% annually, preserving long-term wealth.

3.      Flexible, Quick, and Tax-Efficient: LAS offers quick approval, flexible repayment options, and continued ownership benefits like dividends and capital appreciation, making it an ideal tool for managing cash flow needs.

4.     Overdraft Facility: You pay interest only on the amount you use, not the entire sanctioned limit. You can withdraw funds as needed and repay anytime, which reduces your interest costs. This flexible feature helps manage cash flow efficiently while keeping your investments intact.

What is Loan Against Securities?

A Loan Against Securities is a secured credit facility where you pledge financial securities such as shares, mutual funds, bonds, or life insurance policies as collateral to obtain funds from banks or NBFCs. Instead of selling your investments, you borrow against their value while retaining ownership and potential growth benefits.

Key Features

·        High Loan-to-Value Ratios: Loans can be up to 80-85% of security value for bonds, and around 45-50% for equities and mutual funds.

·        Competitive Interest Rates: Ranging from 8% to 15%, often lower than unsecured loans.

·        Flexible Repayment: Pay interest only on utilized amounts, with no prepayment penalties.

·        Rapid Processing: Digital applications enable loan approvals within hours.

Why LAS Beats Selling Securities

1.      Avoid Capital Gains Tax: Selling triggers tax on gains; LAS does not.

2.     Retain Growth Potential: Equities yield 14-20% historically versus 9-10% loan cost maintain your wealth growth.

3.      Preserve Investment Strategy: No disruption from forced selling during market lows.

4.     Emergency Liquidity: Fast access without market timing risks.

Eligible Securities

·        Listed equity shares

·        Equity and debt mutual funds

·        AAA-rated state government and corporate bonds

·        Life insurance policies

·        Exchange Traded Funds (ETFs)

Interest Rate vs Returns

·        LAS interest: ~9-10%

·        High-rated bonds: 6-10%

·        Long-term equities: 14-20%
Borrowing at 9-10% while equities grow at 14-20% creates a positive yield arbitrage.

Margin & Risk Management

·        Lenders require margins; e.g., borrowing up to 45-85% of market value, depending on security type.

·        Margin calls may require topping up collateral during market dips.

·        Failure to maintain margins can lead to liquidation of pledged securities.

Application Process

1.      Confirm eligible securities.

2.     Digital application via bank or NBFC.

3.      Digital pledge via demat account.

4.     Loan disbursed as overdraft or term loan.

Tax Benefits

·        No capital gains tax as securities aren’t sold.

·        Dividend and interest income continues.

·        Loan principal is not taxable income.

·        Interest deductible if loan is for business purposes.

When to Use LAS

·        Emergency cash needs without disrupting investments.

·        Avoid forced selling during market downturns.

·        Capture new investment opportunities.

·        Manage cash flow fluctuations.

·        Optimize tax efficiency.

Summary

1.      Liquidity with Ownership: LAS provides funds without liquidating your investments or triggering capital gains tax.

2.     Financially Savvy Borrowing: With loan rates lower than investment growth, LAS helps optimize your portfolio’s wealth potential.

3.      Convenient & Flexible: Quick processing, flexible repayments, and continued income benefits make LAS a strategic financial tool.

4.     Overdraft Facility: You pay interest only on funds used, with flexible withdrawals and repayments to minimize costs and maintain your investments intact.

📞 Contact Us Today

 Onestop NRI Advisory Your Partner in Loan Against Security
  📱 Phone: +91 93210 34671
  🌐 Website: www.onestopnriadvisory.com
  📧 Email: info@onestopnriadvisory.com