What is Loan Against Securities (LAS)?
Ananya is a small-business owner who invests surplus cash in equity mutual funds for long-term gains. However, a bulk order opportunity appears that needs immediate working capital. Liquidating investments could mean missing out on future gains and tax savings.
This is where Loan Against Securities (LAS) can help by unlocking funds against investments without forcing you to sell.
Understanding Loan Against Securities (LAS)
You can get a secured loan against your investments, such as shares, mutual funds, bonds, or ETFs. They are pledged as collateral to raise funds. This loan is called a Loan Against Securities. The ownership of securities remains with you, but a lien is marked in favour of the lender.
LAS is a good option when you need liquidity, but do not want to disrupt your long-term investment plans. In India, lenders offer loans against approved securities, subject to loan-to-value (LTV) limits. It determines the amount that can be borrowed against the portfolio value.
LAS Full Form in Banking and Its Importance
LAS full form is Loan Against Securities. It is a secured lending product offered by banks and NBFCs that provides liquidity by using financial assets as collateral.
Interest rates are generally lower because LAS is secured. This makes LAS suitable for short-term funding needs when investments are available as security.
How Does Loan Against Securities Work?
Identify eligible securities
Securities held in a demat account are reviewed against lender-approved lists to check eligibility. It may include shares, mutual funds, bonds, and ETFs. They are evaluated based on liquidity and price volatility before being accepted as collateral.
Apply and pledge securities
The application is completed digitally, and securities are pledged through the depository system. This creates a lien in favour of the lender while ownership of the investments remains with the holder.
Loan assessment and LTV calculation
Loan-to-value (LTV) norms calculate the eligible loan amount based on your investments. It ranges from 50–70% for equity mutual funds and shares and up to 80–90% for debt mutual funds in India.
Also Read: What is Debt Financing? A Complete Guide
Disbursal of funds
Approved funds are credited to the bank account once the pledge and verification are completed within 24–48 hours, subject to processing timelines.
Ongoing monitoring and margin calls
The value of pledged securities is monitored throughout the loan tenure. Additional security or partial repayment may be required to restore margins if market prices fall and LTV thresholds are breached.
Key Features of Loan Against Securities
Competitive interest rates
Lower interest rates are offered because the loan is secured by investments, thereby reducing the lender’s risk.
Flexible loan amount
The loan amount is determined by the value of the investment portfolio and applicable LTV norms. It allows access to higher funding without selling assets.
Quick digital processing
You can complete the digital approval process for pledging securities, reducing turnaround time and paperwork.
No forced liquidation
Your long-term financial goals do not change even during short-term liquidity needs, as your investments remain intact.
Overdraft or term loan options
Some lenders may offer flexible drawdown structures that allow funds to be drawn down as needed rather than in a single lump sum.
Eligibility Criteria and Documentation for LAS
You will be eligible if you hold approved securities in demat form. You will need KYC documents, such as PAN and Aadhaar, along with the bank details.
The pledged securities must meet the lender’s liquidity and volatility criteria. Digital verification and pledge authorisation complete the process.
Benefits of Taking a Loan Against Securities
- Interest cost is low, as secured loans cost less than personal loans
- Investments stay intact for long-term goals
- Quick access to funds compared to many traditional loans
- No capital gains tax, as investments are not sold
- Flexible use of funds, so it is suitable for business needs, emergencies, or debt consolidation
LAS Application Process
The Herofincorp loan against securities application process is digital and quick. Securities are selected and pledged online, KYC is completed digitally, and the loan is assessed in accordance with LTV norms.
After approval, funds are disbursed to the bank account, and portfolio monitoring continues through the loan tenure.
If liquidity needs are being evaluated, eligibility can be checked through Hero FinCorp’s official journey.
Who Should Consider Loan Against Securities?
You can go with LAS if you have investible assets and want short-term liquidity. Your investments will remain as they are. It can be useful as business working capital, for medical emergencies, for short-term opportunities, and for refinancing higher-cost debt.
LAS works best when you plan the repayment and manage market volatility.
LAS Made Easy
LAS can be your saving grace during tough times. Due to the fact that you don't actually have to seel your assets, LAS becomes a savior. Check out Hero FinCorp's personal loan app for a smooth, hassle free process.
Frequently Asked Questions
Can mutual funds be used as collateral for LAS?
Yes, equity and debt mutual funds are accepted by most lenders. It is also subject to the lists approved by lenders.
2. What is the typical loan-to-value (LTV) ratio for LAS loans?
In India, you will find LTVs in the range of 50–70% for equities and equity mutual funds. But debt mutual funds go up to 80–90%, based on risk and volatility.
3. How quickly can funds be received after approval?
Disbursal happens within 24–48 hours after successful digital pledge and verification.
4. Are there penalties for prepayment of LAS?
Terms vary by lender. Many LAS products allow flexible prepayment with minimal or no penalties.
5. Can NRIs apply for LAS?
Eligibility depends on lender policy and the type of securities held. You can ask about NRI portfolios, as some approve under specific conditions.
6. What happens if the value of collateral securities falls?
Lenders issue margin calls, so you need to give additional security or partial repayment to maintain LTV norms.
Disclaimer: The information provided in this blog post is intended for informational purposes only. The content is based on research and opinions available at the time of writing. While we strive to ensure accuracy, we do not claim to be exhaustive or definitive. Readers are advised to independently verify any details mentioned here, such as specifications, features, and availability, before making any decisions. Hero FinCorp does not take responsibility for any discrepancies, inaccuracies, or changes that may occur after the publication of this blog. The choice to rely on the information presented herein is at the reader's discretion, and we recommend consulting official sources and experts for the most up-to-date and accurate information about the featured products.
