Loan Against Securities (LAS) India — Pledge Shares, Get Instant Liquidity

What is Loan Against Securities (LAS)?

A Loan Against Securities — commonly called LAS — is a secured credit facility where you use your financial assets as collateral instead of selling them. Think of it as putting your portfolio to work twice: once for the returns it earns, and again for the liquidity it unlocks.

You pledge eligible securities — like demat shares, equity or debt mutual funds, bonds, or even insurance policies — and in return, you get access to a credit line or overdraft facility. The moment you repay, the pledge is released and full control of your assets returns to you.

In our experience working with investors across Bangalore, this option doesn't get nearly as much attention as it deserves. Most people hear "pledge your shares" and immediately assume it's complicated or risky. But honestly? It's one of the most straightforward financing options available — and when used right, it's significantly smarter than going to a personal loan.

The concept is simple: your investments have value today. LAS lets you access that value without exiting your position.

How Does Loan Against Securities Work?

The process is more straightforward than most people expect. Here's how it flows:

Step 1 — Pledge Your Securities
You choose which securities you want to pledge. These need to be on the lender's approved list. Your shares stay in your demat account, but a lien is placed on them.

Step 2 — Valuation & Credit Limit
The lender calculates the current market value of your pledged assets. Based on that, they assign a Loan-to-Value (LTV) ratio. For equity shares and equity mutual funds, LTV is typically around 50%. For debt mutual funds, it can go up to 80%.

So if you pledge equity shares worth ₹10 lakh, you'd typically get access to up to ₹5 lakh.

Step 3 — Overdraft Facility Activated
Your loan isn't disbursed as a lump sum. Instead, you get an overdraft account. You draw only what you need, when you need it. And you pay interest only on the amount you actually withdraw — not the full sanctioned limit.

Step 4 — Repay & Unpledge
Once you repay, the lien is lifted. Your investments return to normal. No lock-in, no exit penalty in most cases.

We've found that the overdraft structure is one of the most underappreciated features of LAS. Unlike a term loan where you're paying interest on the full amount from day one, here you control what you borrow and what you pay.

LAS Interest Rate in India — 9–12% vs 18–24% Personal Loan

This is where LAS makes the most compelling case for itself.

A personal loan typically comes with interest rates anywhere between 18% and 24% per annum — sometimes more, depending on your credit score and the lender. A credit card outstanding can hit 36–42% annually if you're not careful.

With LAS, because your investments are backing the loan, the lender's risk drops significantly. That lower risk gets passed on to you as a borrower. Interest rates on LAS generally range from 9% to 13% per annum, depending on the type of securities pledged and the lending institution.

And remember — you only pay interest on what you actually use. If you've got a ₹5 lakh overdraft limit but only draw ₹1.5 lakh for three weeks, you pay interest on ₹1.5 lakh for those three weeks. That's it.

Other charges to be aware of:

• Processing fee: Usually up to 1–2% of the loan amount (one-time)
• Account maintenance charges: Varies by lender
• Pledge creation/closure charges: Charged by the depository participant

Compare this to a personal loan where you pay interest on the full disbursal from day one, and the math becomes very clear. For short-to-medium-term liquidity needs, LAS almost always works out cheaper.

Eligible Securities for LAS — Shares, Mutual Funds, Bonds

Not every investment qualifies. Lenders maintain an approved list of eligible securities, and the LTV ratio also varies by asset type. Here's a general breakdown:

Equity Shares (Demat form only)
Listed, approved shares from NSE/BSE. LTV typically 50%. Physical share certificates are not accepted — they need to be in demat form first.

Equity Mutual Funds
AMFI-registered equity MF units registered with CAMS or KFintech. LTV around 50% of NAV. Units continue earning market returns while pledged.

Debt Mutual Funds
Considered lower-risk. LTV can be higher — often up to 80%.

ETFs (Exchange Traded Funds)
Eligible in most cases, subject to lender's approved list.

Bonds and Debentures
Government securities, corporate bonds, sovereign gold bonds (SGBs). LTV varies.

Insurance Policies
Endowment plans, money-back policies, ULIPs — surrender value used as basis for LTV.

One thing we always tell clients: check the approved securities list before assuming your portfolio qualifies. Not every stock or fund makes the cut. Some smaller-cap stocks may be excluded due to liquidity concerns.

LAS vs Personal Loan — Why LAS Wins Every Time

Let's be direct about this. If you have a meaningful investment portfolio and you need funds for 6–18 months, LAS is almost always the better call. Here's why:

There's one scenario where a personal loan still makes sense — if you genuinely don't have enough securities to pledge, or if your portfolio is tied up in asset types that don't qualify. Otherwise, paying nearly double the interest rate when you have investments sitting in your demat account is hard to justify.

And here's something not many people consider: your pledged mutual funds keep earning returns. So even as you're paying 10% interest on a loan, your equity fund might be delivering 12–14% annual returns. In that scenario, you're actually coming out ahead.

Why Work with Finoda for Loan Against Securities?

We're a Bangalore-based financial services platform operating under SEBI guidelines. Over 10,000+ investors have worked with us across equity, mutual funds, insurance, and loans. And we've seen enough loan stories — good and bad — to know that getting the right guidance before you pledge matters.

Here's what we bring to the table:

We Help You Choose What to Pledge
Not all securities give you equal value. We look at your portfolio and help identify which assets to pledge so you protect your long-term positions while meeting your short-term need.

We Don't Push You Into the Wrong Product
If LAS doesn't make sense for your situation, we'll tell you. We've guided people toward personal loans, FD-backed loans, or even portfolio rebalancing when that was the better answer. We're not here to sell — we're here to advise.

We Cover the Full Financial Picture
From your trading account to your tax filing, insurance and loans — everything sits under one roof at Finoda. That means we understand your finances holistically, not just in fragments.

You Get a Real Person, Not Just a Form
Our team in Bangalore is reachable at 9035294343 or info@finoda.in. Walk into our office at Oxford Tower, HAL Old Airport Road, Kodihalli, Bengaluru — or just call us.

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