Loan Against Shares

Loan against shares: borrowing without selling

A loan against shares (LAS) lets you borrow against listed shares, and with many lenders also against mutual fund units or bonds, by pledging them to the lender. You keep ownership and any dividends, but you can’t sell the pledged securities until the lender releases them. LAS is usually offered as an overdraft, so you pay interest only on the amount you actually use.

Early Grow helps investors compare LAS offers from partner banks and NBFCs and complete the pledge and application process.

Key features

• Loan value – a percentage of the market value of approved securities, after a “haircut”. The percentage differs by security type and is subject to RBI rules and lender policy.
• Approved list – lenders accept only securities on their approved list.
• Overdraft or term loan – the lender sets a drawing power, and you draw and repay flexibly within it.
• Pledge – created electronically through your depository (NSDL or CDSL) and released when you repay.

Risks you must understand

• Margin calls – if the market value of your securities falls, the lender can ask you to repay part of the loan or pledge more securities within a short deadline.
• Forced sale – if you do not meet a margin call, the lender can sell the pledged securities, possibly at a loss.
• Market risk stays with you – you are borrowing against assets whose value can fall sharply.

Learn more about investing and pledging on the SEBI investor education portal.

Who can apply and documents

Individuals, and with some lenders HUFs or businesses, who hold eligible securities in a demat account in their own name. Typical documents:

• PAN and address proof.
• The demat holding statement, or a statement of mutual fund units.
• Bank statements, and income proof if the lender asks for it.

How Early Grow helps

1. We review your holdings against the approved lists of partner lenders.
2. We compare the likely drawing power, interest rate, processing and pledge charges, and margin-call terms.
3. We help you complete the application and the online pledge.
4. The lender sets the limit. You draw funds as needed and repay to release your securities.