Get loan
against shares
There are three types of people in the
world when it comes to those in need of money – one with good credit score
looking to borrow money for their immediate needs like buying a home, medical
need, education purposes etc.
There is the next category who do not have
a credit score as they are newly employed or have never had the opportunity to
take a loan or credit card in their life so far. Then there is the last
category who are people with very poor credit score, who have taken loans but
have defaulted or made late payments on their EMI.
Now getting a loan for the first category
is very easy. They already have a history of good
credit report and are the ideal customers banks are looking for. They will
get discounted rates and larger loan amounts.
With the second category who have never
taken a loan or credit card banks will look at their salary, the company they
work for and other liabilities before giving them a loan. Here too it is fairly
easy to get a loan.
It is with the third category that problems
arise. Since these people have a bad credit score which indicates that they
have negative events on their credit report it will be extremely difficult for
them to get a loan. Unless they provide a collateral bank will not give loans
to people with bad credit. Even if they do it will be with high interest rate
and lesser tenure which will make it difficult for the borrower to pay back the
loan.
Here we are going to talk about getting
loans by pledging shares which is a type of secured loan that anyone of the 3
categories can choose from to get a loan at very competitive rates.
What
is loan against shares?
Loan against shares is where a borrower
pledges shares either physical or dematerialized(preferably) as collateral for
a loan. The shares pledged will be of big companies and subject to the market
rate on the day the loan is availed. The loan amount will be about 50% - 80% of
the value of the shares.
The loan amount will be set up as a current
account where only the funds utilized will be subject to interest.
Who
can avail loan against shares?
This loan is a short-term
loan and is best suited for people looking to pay off the debt within a
year at the max. If you think you cannot payback by then it is best to go for
other options. The rate of interest varies from 12% to 15%.
Why
go for loan against shares?
When you take an unsecured loan the
interest rate will be high compared to a secured loan. Also, unsecured loans
will not be given to people with bad credit. Instead of selling your stocks or
going to a local lender who charges exorbitant interest rates you can go for loan
against shares where you don’t have to sell your asset the shares and you can
get a great deal.
Conclusion
It is always advisable to go for a secured
loan for people with bad credit while people with good credit can get a
loan against shares to get better rates and at the same time make your asset
work for you without selling it.