Loan Against Securities or LAS can be a smart way to get instant funds against your shares. You can use this money for a variety of funds like medical bills, education expenses, or any business needs. But you have to keep in mind that not every share is worthy of a loan.

In this article, we will learn how to select the right type of securities for taking out a loan in India.

Defining a Loan Against Securities  

When you opt for a Loan Against Securities, you secure the loan by pledging your assets as collateral. It can involve equities, mutual funds, bonds or other investment tools in your possession. The lender assesses the worth of your securities and extends a loan to you based on a Loan-to-value Ratio or LTV. Unlike selling off your assets, LAS allows you to keep ownership while fulfilling your requirements. The interest rates for LAS are usually lower when compared to other loans, which makes it an attractive choice for investors.  

Ways to Choose The Right Securities for A Loan Against Securities

The following ways will help you select the right securities to avail a loan.

• Liquidity Matters

When deciding which securities to choose for your LAS, it's important to consider liquidity as a factor. Opt for assets with high liquidity, like shares listed on known exchanges, as they can be traded easily in the market. Select investments that can be quickly converted into cash.

• Check the Loan-to-Value (LTV) Ratio

The Loan-to-Value or LTV Ratio is used to analyse the amount you can borrow against your investments or assets. Investments that are of high quality and easily converted to cash generally come with a higher LTV ratio.  

• Keep an Eye on Interest Rates

The interest rates for LAS are impacted by the type of securities you offer as collateral. Secured assets such as government bonds result in lower interest rates. Banks like ICICI Bank offer a competitive rate of interest for LAS where you can easily keep your securities as collateral and take a loan at very nominal rates.

• Stay Updated on Market Trends

The prices of investments can go up and down depending on how the market's doing. It's important to keep an eye on how your investments are performing so that you can make sure your assets stay strong as security for the loan. For example, if a specific industry isn't doing well and its stocks lose value as a result of that downturn, it could affect your ability to get a loan or change the terms of any existing loans you have. Being aware of what's happening helps you adjust things in time and look after your financial well-being.  

• Selecting the Right Lender 

Finding the right lender holds significance in selecting the appropriate securities for your needs. Lenders such as ICICI Bank are open to a wide variety of securities and provide competitive interest rates. They also offer very nominal processing fees, LTV ratios and foreclosure terms. A reliable lender can improve your borrowing journey and guarantee you secure the most favourable deal tailored to your requirements.  

Conclusion

When selecting LAS, it is important to plan and approach the decision thoughtfully. Ensure your portfolio is well diversified while also giving importance to maintaining liquidity to reduce risks. Stay updated on the LTV Ratio as well as market trends and interest rates to make well-informed choices. Ensuring that you have all necessary documentation prepared and opting for a trustworthy lender like ICICI Bank ensures that you can reap the benefits of a Loan Against Securities without hurting your investments.