Liquidity plays a pivotal role in effective financial planning as it ensures the ability to access funds swiftly when needed. Having liquidity provides a safety net during unforeseen circumstances and enables individuals or businesses to grab investment opportunities promptly. It allows for flexibility in handling cash flow, meeting short-term obligations, and pursuing long-term goals without disruption.
However, tying up assets in investments or other forms of wealth can sometimes limit immediate access to cash. This is where tools like loan against securities (LAS) come into play. It allows individuals to unlock the value of their investments without needing to liquidate them. By pledging securities such as stocks, bonds, or mutual funds as collateral, borrowers can obtain a loan from financial institutions at competitive interest rates.
This serves as a bridge between illiquid assets and immediate cash needs, offering convenience, flexibility, and cost-effectiveness in managing financial requirements. Read on further to know more.
Benefits of Loan Against Securities in Financial Planning
Loan against securities (LAS) can offer several benefits in financial planning. Here are some key advantages:
- Liquidity without Selling Assets: LAS allows you to unlock the value of your securities without the need to sell them. This can be particularly beneficial if you have long-term investments or assets with potential for capital appreciation.
- Quick Access to Funds: The loan approval process for loans against securities is generally faster compared to other types of loans. This provides quick access to funds, making it a useful option in times of urgent financial need.
- Lower Interest Rates: Collateral-backed loans against Securities usually carry lower interest rates than unsecured loans, resulting in reduced borrowing costs.
- Flexible Repayment Options: Financial institutions often offer flexible repayment options for LAS, allowing you to tailor the repayment schedule according to your financial capabilities. This flexibility can make it more comfortable to manage the loan within your overall financial plan.
- Retaining Ownership of Securities: When you take a loan against your securities, you retain ownership of the assets. Once the loan is repaid, the securities are returned to you. This is unlike selling assets, where ownership is permanently transferred.
- Tax Efficiency: Interest paid on loans against securities may be tax-deductible in some jurisdictions. This can provide a tax benefit, contributing to overall tax efficiency in your financial plan.
How to Secure a Loan Against Securities?
Securing a loan against collateral involves offering an asset as security to the lender in case you default on the loan. Here’s a general guide on how to secure a loan against securities:
- Understand the Types of Collateral Accepted: Lenders accept various types of assets as collateral, including real estate, vehicles, investments, savings accounts, or valuable personal property. Understand what types of collateral your lender accepts for loans against securities.
- Assess the Value of Your Collateral: Before applying for the loan, evaluate the value of your collateral. Lenders typically only lend a portion of the collateral’s value, known as the loan-to-value (LTV) ratio. The higher the value of your collateral, the more loans against securities you can get.
- Research Lenders: Look for lenders who offer loans secured by the type of collateral you have and compare their terms, interest rates, fees, and repayment options.
- Apply for the Loan: Apply to the chosen lender. Be prepared to provide information about yourself, your financial situation, and details about the collateral you’re offering.
- Lender’s Assessment: The lender will evaluate your application, including your credit history, income, and the value of the collateral. They’ll determine the loan amount, interest rate, and other terms based on this assessment.
- Collateral Valuation: The lender may require a professional appraisal of the collateral to determine its current market value. This helps in setting the loan amount and terms.
- Loan Agreement: If your application is approved, carefully read the loan agreement. Pay close attention to the interest rate, repayment schedule, fees, and consequences of default.
- Provide Collateral Documentation: You’ll likely need to provide documentation proving your ownership of the collateral. This could include property deeds, vehicle titles, investment statements, or other relevant documents.
Empower Your Finances with Loan Against Securities
Understanding the pivotal role of loan against securities in financial planning unveils a powerful tool for unlocking liquidity while safeguarding your investments. With Tata Capital’s seamless solution, you can gain immediate access to capital by pledging various financial assets such as equity shares, mutual funds, bonds, or debt securities.
Their offering not only provides easy access to funds up to Rs. 40 crores but also allows you to continue earning a Compound Annual Growth Rate (CAGR) on your financial assets. What sets Tata Capital apart is its commitment to transparency and convenience, with zero charges for convenience, foreclosure, and prepayment.
Embrace the opportunity to leverage your investments and fulfil your financial goals with Tata Capital’s loan against securities. Unlock the true potential of your investments today.