Loan Tips: You can also take a loan on shares; Know who will get it and which documents will be required..

Do you need a loan and you have knocked on the doors of many banks but are facing a lot of difficulty in getting a loan, then you have another way to get a loan. If you have shares in a company, then you can also get a loan by pledging them.

Yes, you can also fulfill your money needs by pledging shares. For this, you will not even need to sell the shares. Let us know how stock market investors can take a loan on their stocks. After all, what is its process, and what documents will be required?

Investors can pledge the shares they have to get a loan. Banks and non-banking financial companies (NBFCs) provide this facility. In these, the loan amount can be up to 50% of the market value of the pledged shares. The person taking the loan will have the ownership of the shares.

They will continue to get the benefit of dividends and voting rights. However, the shares will be kept in a demat account and these pledged shares will remain in the name of the lender until the loan is repaid. The loan can be structured as a lump sum or an overdraft facility. This provides convenience to the borrower.

Who can take a loan against shares?
To take a loan against shares, a person must have shares of listed companies, which the lender approves. Apart from shares, some institutions also give loans against mutual funds or bonds.

What documents will be required?
Keep these documents ready to take a loan against shares:

KYC documents like PAN, Aadhaar

Proof of ownership of shares or securities i.e. demat account statements

Proof of income like bank statements, salary slips, and IT returns.

Important details of the loan
The interest rate on loans against shares is lower than unsecured loans like personal loans. This is one of its major benefits.

The loan tenure can vary. This tenure ranges from one to three years.

Lenders offer flexible repayment options in this. In this, the borrower can repay the principal at the end of the tenure by paying monthly interest.

Also, keep these things in mind.

If there is a major fall in the market value of the pledged shares, the lender may ask for additional collateral or partial repayment.

The loan amount is always limited to a certain percentage of the current market value of the portfolio.

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