LAS: A Comprehensive Guide

What is LAS?

Loan Against Securities (LAS) is a type of secured loan where an individual pledges their financial assets, such as stocks, bonds, mutual funds, or fixed deposits, as collateral to borrow money. LAS offers a way to access liquidity without the need to liquidate investments, making it a useful tool for those in need of funds for short-term or emergency needs. The loan amount is typically a percentage of the market value of the pledged securities and comes with an interest rate that varies based on the type and value of the collateral.

Types of LAS

  • Loan Against Shares:
    • Individuals pledge their shares (equity or preference) as collateral to borrow funds.
    • The loan amount is a percentage of the current market value of the shares.
    • Interest rates tend to be competitive but vary depending on the type of shares and lender.
  • Loan Against Mutual Funds:
    • Investors can pledge mutual fund units as collateral to obtain a loan.
    • The loan amount is based on the value of the mutual fund units, typically up to 50-60% of the NAV (Net Asset Value).
    • Mutual fund-backed loans often come with flexible repayment terms.
  • Loan Against Fixed Deposits (FDs):
    • Individuals can pledge their fixed deposit certificates to secure a loan.
    • The loan amount is typically a percentage of the FD value, usually up to 90%.
    • Interest rates on FD-backed loans are generally lower compared to other types of secured loans.
  • Loan Against Bonds:
    • Investors can pledge bonds as collateral to borrow funds.
    • The loan amount depends on the face value or market value of the bonds.
    • Bond-backed loans are generally offered with lower interest rates, depending on the bond\'s credit rating and tenure.

Benefits of LAS

  • Provides quick access to funds without having to sell your investments or assets.
  • Interest rates are typically lower than unsecured loans because the loan is secured against assets.
  • Allows individuals to maintain their investment portfolio while using assets for liquidity.
  • Flexibility in the repayment schedule, making it a suitable option for short-term or emergency funding needs.
  • Helps preserve long-term investments, as you can access cash without liquidating your assets at an unfavorable time.
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