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What is a Loan Against Shares; Everything You Need to Know

2 Mins 23 Jan 2023 0 COMMENT

Have you purchased shares as an investment option? If so, the shares you have bought work as more than just assets that reap rewards and diversify your portfolio. They can also act as collateral if you need funds via a loan. Today, most leading banks and financial institutions offer loans against securities, wherein you can pledge your shares as collateral. To know about loan against shares in greater detail, continue reading.

What is Loan Against Shares?

Before getting into the nitty-gritty, it is essential to learn about the loan against shares meaning.


A loan against shares is a type of term loan which is secured in nature. The security offered as collateral consists of shares. A significant benefit is that most banks and financial institutions accept both equity-based and debt-based shares as collateral.


Just like any other loan, you also have to pay interest when you borrow funds via a loan against shares. Also, since the loan is a secured one, the interest rates tend to be relatively lower.


The tenure of a loan plays a key role in how the repayment of the borrowed amount will pan out. When it comes to a loan against shares, most lenders set the tenure according to the type and value of the shares pledged.


Generally, you can get a loan against shares in two ways; overdraft facility or demand facility. When you opt for an overdraft facility, you get extended a loan amount up to a certain limit. You can withdraw funds as and when required from within this limit. On the other hand, when you opt for a demand facility, you are disbursed the entire loan amount in one go.


If you opt for an overdraft facility, you will have to pay interest only on the amount you have withdrawn. However, if you opt for the demand facility, you will have to repay the entire loan amount, along with interest, via EMI payments.


When you pledge your shares to avail of a loan against securities, you cannot redeem them till the tenure of the loan is over or the entire loan amount has been repaid. However, the shares remain in your account and stay active in the market. Thus, you will be entitled to any profits or dividends earned on the same.

Claim over Shares:

Once you have repaid the loan amount or the tenure of the loan is over, whatever the lender’s policy, you will be able to have a complete claim over the shares pledged.


Applying for a loan against shares is fairly straightforward. Since the security pledged consists of shares in your demat account, you do not have to submit excessive paperwork to prove income nor do you have to worry about credit score as such. Thus, the loan approval process is considerably expedited too and the funds are disbursed to you rather rapidly. Additionally, to make things even easier, you can apply for a loan against shares digitally via online channels.

If you are in need of short-term liquidity, you may consider applying for a loan against shares. This option may be beneficial for both commercial and personal purposes, as it provides the opportunity to leverage your investments to meet your financial needs.

Disclaimer: ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investments in securities market are subject to market risks, read all the related documents carefully before investing. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.