Loan against securities is gaining popularity because of its lower interest rate and flexible repayment characteristics.  In a loan against securities, you put your securities ( mutual funds, shares, debenture) as collateral to the bank to obtain a certain amount of loan. In this way, you will be able to access a loan amount without even sacrificing your security.  Taking LAS during the bull market is considerable and here is why?

Consider you want a loan against your securities and the LTV value of that loan on a usual basis is 60% but taking a loan during a bull condition can increase the LTV value which can end up getting you a higher loan amount.

Things to Consider before taking a loan during a bull condition:

The deal might seem interesting but we have to keep certain things in our mind before taking LAS. 

Operates as an Overdraft Facility:

We all the term “overdraft” in our life. Usually under overdraft, a person pledges his fixed deposit (FD) to secure some loan amount. The LAS also works with the same structure, you have to pledge your securities to avail loan amount. The interest rate on these loans is also affordable which helps the borrower by not burdening under heavy debt but we have to keep in mind about the market condition. If the market correction devalues the securities then the lender can ask you to pay some more amount or securities to match the loan amount.

Immune to Credit rating:

What is a credit rating? 

Basically, it is a way to check a person’s loan repayment capability on time. In the case of LAS, the lender may be easygoing on the CIBIL score because the loan is already backed by the securities. It does not matter whether you have a low CIBIL score or a high one, getting a loan this way can be easier.

Flexible end use:

If you are opting for a loan through LAS, it is not necessary to disclose the use of the loan amount. You are free to use the loan amount in any way you want. You are not liable to answer the use of the amount to anyone unlike the normal loan obtained from the bank.

Loan to Value ratio varies:

While taking a loan against securities during the bull condition can benefit you. Normally lenders give 60% of the securities amount as a loan to the borrower but taking a loan during the bull market can benefit you in the way that the LTV value can rise due to the performance of your securities during that time.

Conclusion:

Thinking of taking a loan from LAS, opt for the right time and that is during the bull condition. It will give you the chance of getting more loan amounts in comparison to a normal day. 

Still confused about the process of the loan, we are here for you. Divadhvik offers you proper consultation and advice for a LAS loan.