Which of your investments can be used as loan collateral?

Which of your investments can be used as loan collateral?

• Investors may hold valuable assets but still face temporary cash requirements. A loan against shares can help eligible investors access funds without selling their listed investments.
• Under a Loan Against Shares facility, eligible listed shares are pledged as collateral. The investor can therefore raise funds while retaining ownership of the pledged securities.
• Bajaj Finance offers Loan Against Shares for eligible investors seeking liquidity against listed shares. The facility can help address financial requirements without forcing investors to liquidate long-term investments.
• However, not every investment can automatically be used as collateral. Understanding which securities qualify is essential before applying.

What investments can be used as collateral?

• Loan Against Shares is specifically designed around eligible listed shares. The lender determines which securities can be accepted based on applicable eligibility criteria.
• Investors should therefore check the approved list before applying. Securities that are not approved or have limited liquidity should not be pledged without understanding the applicable conditions.
• Shares should also be free from existing encumbrances. This helps ensure that the lender can establish the required security interest over the pledged assets.
• The value of eligible shares also influences the amount that can be sanctioned.

Why are listed shares suitable for a secured facility?

• Listed shares have an observable market value. Their prices can be tracked through recognised market platforms.
• This makes it possible for lenders to assess the value of eligible securities when determining the borrowing limit.
• However, listed shares remain market-linked assets. Their value can increase or decrease after they are pledged.
• Therefore, investors should understand the potential effect of market movements on their collateral.
• Bajaj Finance enables eligible investors to use listed shares as collateral under its Loan Against Shares facility. The availability and value of the facility remain subject to applicable terms.

Can every listed share be pledged?

• No. Listing alone does not automatically make a share eligible for Loan Against Shares.
• Lenders may specify particular securities that can be accepted. They may also consider liquidity, market value, and other applicable criteria.
• Investors should check the lender’s approved securities before applying.
• It is also important to avoid pledging securities without understanding the applicable terms. Low-liquidity or unapproved investments may not provide suitable collateral for this facility.
• Bajaj Finance evaluates eligible securities according to its applicable lending criteria.

How much can you borrow against eligible shares?

• The available loan amount depends on the value of the eligible shares pledged. Other lending conditions may also affect the sanctioned amount.
• Under the stated Loan Against Shares guidelines, loan amounts can range from Rs. 25,000 to Rs. 1,000 crore.
• The value of your investment does not necessarily equal the amount you can borrow. Lenders apply applicable limits to protect against changes in collateral value.
• Borrowers should therefore determine the actual requirement before pledging securities.
• The Borrowing only the required amount can also help keep repayment obligations manageable.

What happens to your shares after they are pledged?

• Pledging shares does not mean immediately selling them. The securities remain part of the investor’s holdings while serving as collateral.
• The pledge remains in place until the applicable loan obligations are fulfilled.
• This can help investors retain their long-term investment position. However, the pledged securities remain subject to the terms of the facility.
• Investors should understand their responsibilities regarding the pledged assets.
• They should also monitor their loan account and make repayments on time.

How does the loan against shares interest rate work?

• Loan against shares interest rate can vary based on factors such as the value and type of securities pledged.
• The applicable rate may also vary within the product category based on specific lending criteria.
• Borrowers should understand whether the applicable interest rate can change during the loan tenure. Variable rates can affect the overall cost of borrowing.
• The interest rate should not be the only factor considered. Processing fees, documentation charges, stamp duty, penal charges, and other applicable costs can also affect the total borrowing cost.
• Bajaj Finance provides applicable Loan Against Shares terms based on the product and borrower requirements. Investors should review the current terms before applying.

What happens if the share price falls?

• Share prices can fluctuate because of market conditions. A decline in the value of pledged shares can affect the collateral supporting the facility.
• Lenders may have specific requirements if the collateral value falls below the applicable threshold.
• Depending on the terms, the borrower may need to provide additional eligible securities or take another permitted action.
• This makes monitoring important throughout the loan tenure.
• Investors should also maintain sufficient funds to meet their repayment obligations.

Why should you avoid pledging unsuitable investments?

• Not every investment is appropriate collateral. Low-liquidity securities can make it more difficult to maintain adequate collateral value.
• Investors should also avoid pledging securities that are already encumbered.
• Before applying, check:
  • Whether the shares are eligible
  • What repayment obligations apply
  • How the loan amount is calculated
  • Whether the securities are sufficiently liquid
  • What happens if the share value declines.
  • Whether the shares are free from encumbrances.
  • What charges apply to the facility
• These checks can help investors understand the risks before pledging their investments.

What are the key features of loan against shares?

• A loan against shares can offer several features for eligible borrowers.
• Loan amount can range from Rs. 25,000 to Rs. 1,000 crore, subject to applicable conditions. Loan tenure can vary according to the product and customer preference.
• The application process may be available online or offline. Digital platforms can provide convenient access and account management.
• Physical branches can provide personalised assistance where required.
• Documentation requirements are generally simplified, but applicants should submit the required information promptly. Delays in documentation can affect processing.
• Bajaj Finance provides applicable digital and physical channels for Loan Against Shares applications.

What happens if you do not repay on time?

• Timely repayment is essential because investments are being used as collateral.
• Delayed payments may result in penal charges and other applicable costs. Continued default can increase the risk of asset liquidation.
• This could result in the investor losing some pledged securities.
• Borrowers should therefore understand the repayment schedule before accepting the facility. They should also assess their ability to meet interest and other payment obligations.

Can an EMI Calculator help?

• An EMI Calculator can help estimate monthly instalments based on the loan amount and tenure.
• Investors can use the calculation to assess whether the proposed borrowing fits their cash flow.
• A longer tenure may affect the total interest paid. Therefore, borrowers should consider both monthly affordability and overall borrowing costs.
• The actual repayment amount depends on the applicable interest rate, fees, and loan terms.

The bottom line

• A loan against shares can turn eligible listed investments into a source of liquidity without requiring immediate liquidation.
• However, not every investment qualifies as collateral. Investors should focus on approved, sufficiently liquid, and unencumbered listed shares.
• Bajaj Finance offers Loan Against Shares for eligible securities, subject to applicable terms and conditions.
• Before applying, understand the loan amount, tenure, collateral requirements, fees, and repayment obligations. The loan against shares interest rate should also be assessed alongside the complete cost of borrowing.
• Most importantly, timely repayment is essential. A well-understood borrowing arrangement can provide liquidity while allowing investors to retain their long-term listed investments.

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