InvestorQ : I want to take a loan against shares and mutual funds, can you share the details?
Samita Patil made post

I want to take a loan against shares and mutual funds, can you share the details?

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Manisha Mehta answered.
1 month ago
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Well, that is technically called a loan against security. Under this loan, one pledges its shares, mutual funds, or life insurance policies as collateral to the bank against the specified loan amount. It is generally offered as an overdraft facility after one has deposited the securities in his account. So, under this loan, you can draw money from your account and you would only be liable to pay interest on the loan amount you use and for how long you use it.

For example, you want a loan against shares of Rs 1 lakhs. Now suppose you draw Rs 40,000 and deposit the amount back into your account. In that case, interest shall be payable on Rs 40,000 part only.

To avail of the loan, one needs to provide a margin amount of 50% of the current market price of the shares being offered as security. Minimum and maximum loan amounts vary from bank to bank. However, it somewhere ranges between Rs 50,000 to Rs 20,00,000.
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