Best NBFCs for Loan Against Securities: Leverage Your Investments
Did you know that in India, where millions hold investments in shares and mutual funds, you can get a quick loan against them without selling? The best NBFC for a Loan Against Securities is Bajaj Finserv, thanks to its vast list of approved assets and incredibly fast digital process.
Quick Picks: Top NBFCs for Loans Against Securities
In a hurry? Here are our top choices for different needs:
- Best Overall: Bajaj Finserv
- Best for Trust & Large Loans: Tata Capital
- Best for Quick Digital Process: IIFL Finance
Why Choose an NBFC for a Loan Against Securities?
You have built a solid portfolio of shares and mutual funds. That is great. But what happens when you need money urgently? The common advice is to sell your investments. This is often a bad idea. You lose potential future growth and you might have to pay capital gains tax.
There is a smarter way: a Loan Against Securities (LAS). Instead of selling, you use your investments as collateral to get a loan. When it comes to getting this type of loan, Non-Banking Financial Companies (NBFCs) are often a better choice than traditional banks.
Here’s why:
- Speed: NBFCs are known for their quick processing. Many have fully digital processes that can get you money in your account within 24-48 hours.
- Flexibility: They often have more flexible eligibility rules. Their focus is on the value of your securities, not just your credit score.
- Specialization: NBFCs specialize in specific loan products. This means they have a deep understanding of LAS and can offer a smoother experience.
How We Ranked the Best NBFCs for LAS
We did not just pick names out of a hat. Our ranking is based on factors that directly affect you as a borrower. We looked at several key areas to find the best options in the world of NBFC and Microfinance in India.
- Interest Rates: The cost of the loan is critical. We compared the interest rates offered by different NBFCs to find the most competitive ones.
- List of Approved Securities: A wider list means you can pledge more of your portfolio. We favored NBFCs that accept a broad range of stocks, mutual funds, and bonds.
- Loan-to-Value (LTV) Ratio: This decides how much you can borrow against your portfolio's value. A higher LTV is better. For example, if you have 10 lakh rupees in shares and the LTV is 60%, you can get a loan of up to 6 lakh rupees.
- Processing Time & Digital Experience: We value your time. NBFCs with a fast, easy, and fully online application process scored higher.
- Fees and Charges: We checked for hidden costs like processing fees, annual renewal charges, and penalties for paying off the loan early.
The Top 5 NBFCs in India for a Loan Against Securities
Based on our criteria, here are the best NBFCs to leverage your investments for a loan.
1. Bajaj Finserv
Why it's #1: Bajaj Finserv is our top pick because it offers an excellent all-around package. Their digital process is one of the fastest in the industry. You can often get approved and receive funds within the same day. They have a massive list of approved securities, including over 1,000 stocks and mutual funds. This gives you great flexibility in what you can pledge.
Who it's for: This is the best choice for investors with a diverse portfolio who need money very quickly and prefer a completely online experience.
2. Tata Capital
Why it's good: The Tata name carries immense trust. Tata Capital lives up to this reputation with transparent processes and clear terms. They are particularly good for larger loan amounts, often offering customized solutions for high-net-worth individuals. Their customer service is responsive and helpful, guiding you through the process.
Who it's for: Ideal for borrowers seeking a large loan amount who prioritize brand trust and reliable customer support over pure speed.
3. HDB Financial Services
Why it's good: As a subsidiary of HDFC Bank, HDB Financial Services combines the agility of an NBFC with the reliability of a major bank. They have a strong physical branch network, which is a big plus if you prefer face-to-face interaction. Their interest rates are competitive, and their processes are well-established.
Who it's for: A great option for people who want the comfort of a bank-backed institution and may want the option of visiting a branch for assistance.
4. Aditya Birla Finance
Why it's good: Aditya Birla Finance stands out for its competitive Loan-to-Value ratios. They often allow you to borrow a higher percentage of your portfolio's value compared to some competitors. They also accept a wide variety of securities, from equity shares to debt mutual funds, giving you plenty of collateral options.
Who it's for: Investors who want to maximize the loan amount they can get from their existing investments.
5. IIFL Finance
Why it's good: IIFL is a digitally-focused company, and their LAS product reflects this. The application and approval process is slick and modern. If you already have a demat account with IIFL Securities, the process can be incredibly fast as they already have your details and portfolio information. They often run promotional offers with attractive interest rates.
Who it's for: Tech-savvy investors, especially those who are existing customers of the IIFL group, will find the process seamless.
Understanding the Loan Process
Getting a Loan Against Securities is straightforward. Here are the usual steps:
- Choose Lender & Apply: Select an NBFC from the list above and fill out their online application form. You will need your basic KYC documents.
- Pledge Securities: You will be asked to pledge the shares or mutual fund units you want to use as collateral. This is done online through your demat account. Pledging means you still own the securities and receive dividends, but you cannot sell them until the loan is repaid.
- Get Funds: Once the pledge is confirmed, the NBFC sets up an overdraft account for you. You can withdraw money from this account as you need it, up to your approved limit.
- Repay: You only pay interest on the amount you have actually used, not the entire sanctioned limit. You can repay the principal at your convenience, which makes it very flexible.
Key Risks to Watch Out For
While LAS is a great tool, you must be aware of the risks involved.
The biggest risk is a margin call. If the market value of your pledged securities drops significantly, the NBFC will ask you to cover the shortfall. You will have to either pledge more securities or pay back a portion of the loan immediately. If you fail to do so, the lender has the right to sell your securities to recover their money.
Also, remember that most of these loans have floating interest rates. If the Reserve Bank of India increases rates, your loan's interest rate will likely go up too. Always read the loan agreement carefully to understand all fees, including processing, renewal, and foreclosure charges. Make sure you are comfortable with the terms before you sign.
Frequently Asked Questions
- What is a Loan Against Securities (LAS)?
- A Loan Against Securities is a type of loan where you use your shares, mutual funds, or bonds as collateral to borrow money. You don't have to sell your investments. The lender holds them as security until you repay the loan.
- Can I still receive dividends on my pledged shares?
- Yes. Even when your shares are pledged to the NBFC, you remain the owner. You will continue to receive all dividends, bonuses, or other corporate benefits directly in your bank account.
- What happens if the value of my shares falls after taking the loan?
- If the value of your pledged securities falls below a certain level, the lender will issue a 'margin call'. This means you will need to either pledge additional securities or repay a part of the loan to bring your collateral value back to the required level.
- Is a Loan Against Securities better than a personal loan?
- For investors, it is often a better option. The interest rates on LAS are typically lower than personal loans because it is a secured loan. It also offers more flexibility, as you usually pay interest only on the amount you use from an overdraft facility.
- How long does it take to get a Loan Against Securities from an NBFC?
- Many NBFCs have a fully digital process. If your documents are in order and your securities are eligible, the process can be completed very quickly, often with funds being available in your account within 24 to 48 hours.