The Ultimate Guide to Selecting the Right Lender for a Loan Against Securities

Investors often find themselves in situations where they need immediate liquidity but do not want to sell their valuable investments. In such cases, a Loan Against Securities (LAS) serves as an ideal financial solution. It allows investors to borrow money by pledging their financial assets, such as shares, Mutual Funds and bonds, as collateral while retaining ownership of their investments.

Choosing the right lender for a Loan Against Shares or other securities is crucial, as it impacts loan terms, interest rates, repayment flexibility, and the overall borrowing experience. Leading financial institutions like ICICI Bank offer tailored Loan Against Securities options, making it easier for investors to meet their financial needs without disrupting their long-term wealth-creation strategies.

In this guide, we’ll explore the key factors to consider when selecting the right lender for your Loan Against Securities to ensure a smooth and beneficial borrowing experience.

1. Understand the Types of Lenders Available

When seeking a Loan Against Securities, it’s important to evaluate different types of financial institutions:

a) Banks

Many leading banks, including ICICI Bank, offer LAS with attractive interest rates, seamless digital processing, and a well-established customer support system. 

b) Non-Banking Financial Companies (NBFCs)

NBFCs provide Loan Against Securities with more flexible eligibility criteria, making them a viable choice for borrowers who may not qualify under strict banking regulations. However, interest rates may be slightly higher than those offered by banks.

c) Stockbrokers & Financial Institutions

Some stockbrokers offer Loans Against Securities, but these options may come with limitations such as higher interest rates, additional brokerage charges, or stricter margin calls.

2. Check the Loan-to-Value (LTV) Ratio

The Loan-to-Value (LTV) ratio determines how much loan you can avail against the market value of your securities. Different lenders offer varying LTV ratios based on the type of security:

Lenders with higher LTV ratios allow borrowers to get maximum funds against their investments. A reputed bank like ICICI Bank offers attractive LTV ratios with a structured margin system to safeguard against market fluctuations.

3. Compare Interest Rates & Charges

Interest rates play a significant role in determining the affordability of a Loan Against Securities. The rates depend on multiple factors, including the lender, type of security, and the borrower’s profile.

A lender with transparent pricing and lower processing fees is the best choice for a Loan Against Securities.

4. Evaluate the Repayment Options

The right lender should offer flexible repayment options that align with your financial situation. The common repayment structures include:

a) Overdraft Facility

• Pay interest only on the amount used for the period the amount was utilised, making it a cost-effective option.
• Ideal for investors who need funds occasionally rather than in a lump sum.

Major Banks like ICICI Bank offers the OD facility, allowing borrowers to choose a repayment plan that suits their financial strategy.

5. Assess the Digital & Online Application Process

Leading banks like ICICI Bank also offer a digital loan application process for their selected customers, reducing the hassle of physical paperwork. Look for lenders that provide:

• Instant online approvals for eligible customers.
• E-signature facilities to complete documentation remotely.

In the online Loan Against Securities facility, you can check eligibility in real-time and pledge securities seamlessly through Net Banking and mobile banking apps like the iMobile.

6. Review the Eligible Securities Accepted

Different lenders have different criteria for the types of securities they accept for a Loan Against Securities. Ensure that your chosen lender allows pledging of:

• Equity Shares listed on NSE & BSE
• Mutual Funds (Equity, Debt)
• Government Bonds
• Exchange-Traded Funds (ETFs)
• Sovereign Gold Bonds (SGBs)

Banks have an approved list of securities, and only securities from recognised issuers are accepted. Checking the approved securities list before applying can help avoid unnecessary delays.

7. Understand the Margin Call Policy

Since Loan Against Securities is market-linked, lenders monitor the value of pledged securities daily. If the value falls below a certain threshold, a margin call is triggered.

A good lender will:

• Provide timely alerts before a margin call is enforced.
• Offer a grace period to deposit additional funds or pledge more securities.
• Allow partial repayments to avoid selling pledged shares.

Selecting a lender with a customer-friendly margin policy can help borrowers manage risks better.

8. Check the Customer Support & Loan Management Features

Before finalising a lender, ensure they provide:

• 24/7 Customer Support – Important for urgent queries.
• Dedicated Relationship Manager – For high-value borrowers.
• Easy Loan Top-Up Facility – To borrow more against the same securities.
• Online Loan Management Portal – For repayments and tracking.

Banks with a strong customer service network, such as ICICI Bank, provide smooth loan servicing, reducing the hassle of managing LAS accounts.

Conclusion

A Loan Against Securities is a powerful financial tool that allows investors to utilise their assets without selling them. However, selecting the right lender is crucial to ensuring a seamless, cost-effective, and flexible borrowing experience.

When choosing a lender, compare factors such as interest rates, LTV ratios, repayment options, margin policies, and digital capabilities. Leading banks like ICICI Bank provide competitive Loan Against Securities options with easy processing, making them a reliable choice for borrowers seeking quick liquidity.

By carefully evaluating these factors, investors can maximise the benefits of their securities-backed loans while minimising risks.