Is it possible to obtain a loan against shares in a demat account?
A loan against shares (LAS) is a type of loan that allows investors to borrow money against the securities held in their Demat account. This type of loan is popular among investors who do not want to sell their shares but require funds for personal or business purposes. In this article, we will discuss the process of availing a loan against shares in a demat account. However, before that, you need to open a demat account.
Step 1: Check eligibility
Before applying for a loan against shares using the best stock trading app, investors should check their eligibility criteria. Each lender has its own eligibility criteria, but some common factors that are considered include:
- Value of the securities held in the Demat account
- A credit score of the borrower
- Income and employment status of the borrower
- Type of securities held in the Demat account
Step 2: Choose a lender
Once investors have determined their eligibility, they can choose a lender that offers a loan against shares. It is recommended to compare the interest rates, processing fees, and other charges levied by different lenders before making a decision about a demat account opening.
Step 3: Submit the loan application
The next step is to submit the loan application to the chosen lender. The application form should be filled with accurate and complete information. The lender may require additional documents such as a PAN card, ID proof, address proof, and income proof when using the most reliable stock trading app.
Step 4: Pledge securities
Once the loan application is approved, investors need to pledge the securities held in their Demat account with the lender. This is done by signing a pledge agreement. This gives the lender the right to sell the securities in case of default on the loan. This is done using the idea of a demat account opening.
Step 5: Disbursement of the loan
Once the securities are pledged, the lender will disburse the loan amount to the borrower. The amount of loan that can be availed depends on the value of the securities held in the Demat account. In addition, it depends on the eligibility criteria of the lender using the most suitable stock trading app.
Step 6: Repayment of loan
The loan against shares is a secured loan, which means that the securities held in the Demat account act as collateral. The borrower needs to repay the loan amount along with interest within the stipulated time period. The interest rates on loans against shares are usually lower than unsecured loans such as personal loans or credit cards when it comes to opening a demat account.
Step 7: Release of the pledge
Once the loan is repaid in full, the lender will release the pledge on the securities held in the Demat account. The securities will then be transferred back to the borrower’s Demat account.
As a result, investors can borrow money against their securities without having to sell them through loans against shares. The process of availing a loan against shares involves checking eligibility, choosing a lender, submitting the loan application, pledging securities, disbursement of the loan, repayment of a loan, and release of pledge only with the help of a demat account opening.