Get To Know Loan Against Shares

Investing in shares has always been a popular financial tool for people. People study and follow the stock market carefully for hours and hours, in order to place correct bids on the most profitable shares. There is risk, excitement and an unpredictable string of profit and loss attached to the shares. But once you buy shares, it is a valuable addition to your assets. Shares are especially valuable if you need money in emergency.

Loan against shares is an instrumental alternative to meet your financial requirements as and when needed. Usually, when people are hit by a financial crisis or an emergency need for cash, all they could think of is availing cash through personal loans. Personal loan is no doubt a convenient option to take instant cash from the bank, without going through tedious procedures and documentation. However, the interest rates which entail the loan plan are unreasonably high. Your financial requirement will be met but the repayment of this loan will become a liability. Therefore, financial experts and consultants recommend that if an individual has bought shares, he or she must try to monetize them.

Whether for a medical emergency or your daughter's school fee installment got missed, cash emergency can come in any time. Needless to say you look out for a finance option that provides you quick money with minimal hassle. Loan against shares involves simple procedures and the borrower does not need to go through a lengthy set of documentation. The loan application is granted quickly, after checking for basic details like income, credit report etc. The cash is also disbursed quickly without any additional hassle.


Banks and other financial companies lend loan against shares only for a year. The tenure for this kind of loan is absolutely fixed. If the individual has not been able to repay the loan within this tenure, then he or she will have to pay extra money. The loan borrower will pay the extra money as per the extended time period. There are no pre-determined or fixed penalty charges for exceeding the loan tenure. This feature surely does not provide much flexibility, but is beneficial to both the borrower and the lender. The borrower gets exempted from unreasonable penalty charges and the borrower gets the benefit of reduced risk.

Taking loan against shares is a secured kind of loan, so you need not worry about safety. However, in all kinds of loans against securities, the margins are kept very high by the lenders. So, it reduces the limit of loan for you. For instance, if you have applied for loan against shares worth 8 lacs, banks will grant you a loan till 4 lacs. The lenders always keep the margin very high because the share market is ever fluctuating. If the value of your share drops, the lender will have to bear the risk. With high margins, lenders reduce their chances of risk. In some cases when the share prices drop too low, the borrower is also asked to compensate for the remaining value.

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Nick Patel

Nick Patel is freelance enthusiast and ingenious writer who enjoys the challenges of creativity attention to detail. In free time I like to...