Loan against shares: 7 things every investor must know
1/7
Need money? Your share portfolio can fund it, without selling a single stock
Loan Against Shares (LAS) lets you pledge your equity investments as collateral and borrow money from a bank — while keeping full ownership of your shares. No selling. No missing out on future gains. Just smart borrowing.
2/7
Banks will lend you up to 50% of your share value: Here's the fine print
The Loan-to-Value (LTV) ratio for equity shares is capped at 50%. So, if your pledged portfolio is worth ₹10 lakh, you can borrow up to ₹5 lakh. For debt mutual funds, this goes higher, up to 75–85%. RBI caps the maximum loan at ₹20 lakh for Demat-held shares.
3/7
If your shares fall in value, the bank can force-sell them. Here's how to stay safe
If markets drop and your portfolio value falls below the required LTV threshold, the lender issues a margin call. You get roughly 7 days to pledge more shares or deposit cash. Miss the deadline — and the bank can sell your shares without asking. This is the biggest risk of LAS.
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4/7
This loan has no nonthly EMIs: You only pay interest on what you use
LAS is structured as an overdraft (OD) facility. You draw funds as needed and pay interest only on the amount withdrawn, not the full sanctioned limit. The principal can be repaid whenever you have surplus funds. It is one of the most flexible repayment structures in retail lending.
5/7
LAS interest rates are 10.5–12% per annum; far cheaper than a personal loan
Because your shares act as security, banks charge significantly lower rates compared to unsecured loans. Personal loans can cost 14–24% per annum. Credit cards charge even more. LAS brings your borrowing cost down sharply — as long as markets stay stable.
6/7
Your portfolio may not be eligible: Banks only accept approved, liquid stocks
Lenders maintain a curated list of approved scrips, typically large-cap, highly liquid stocks from Group 1. Penny stocks, unlisted shares, and illiquid securities are rejected outright. Always verify whether your specific holdings qualify with your lender before applying.
7/7
LAS is smart for short-term needs; but risky in a falling market
Use it when: You need funds for a medical emergency, business expansion, or a short-term opportunity — and you expect your shares to rise in value.
Avoid it when: Markets are highly volatile, you need funds for a long period, or you cannot afford a margin call. In choppy markets, the risk of forced selling can outweigh the benefit of cheaper credit.
Avoid it when: Markets are highly volatile, you need funds for a long period, or you cannot afford a margin call. In choppy markets, the risk of forced selling can outweigh the benefit of cheaper credit.