Things to Keep in Mind While Applying for a Loan Against Security
Planning to apply for a loan against your mutual funds or other securities? There is an ‘n’ number of things to consider. You have to calculate the EMIs, find out a good loan scheme, and assess the profitability of your decision to take the loan. Apart from that, you’ll have to consider a few other factors before submitting the loan application.
On that note, take a look at the things applicants should keep in mind while applying for a loan against security.
On that note, take a look at the things applicants should keep in mind while applying for a loan against security.
Mortgage the right security: The first thing all loan against mutual fund applicants must keep in mind is, mortgaging the right security is essential. Firstly, the collateral should be in accordance with your expectations i.e. in accordance with how much you want to borrow. A lender will only allow applicants to borrow around 50% to 60% of the collateral’s present market value as loan. Hence, you must align your expectation according to your loan eligibility. Also, make sure to use securities which don’t come with a lock-in period.
Check the eligibility criteria for loan against security to find out your exact eligibility.
Use the facility only when required: It is always tempting to keep your mutual funds as your collateral to avail a loan against it. However, there’s a rule which everyone loan applicant is expected to abide by; apply for a loan only when it’s needed. In short, it is tempting but don’t mortgage your shares/ mutual funds or any other securities to purchase luxury items. The facility is and must be used only during an emergency.
Chalk out a viable repayment plan: Lastly, in order to avoid liquidation of your asset/ security by the lender, avoid missing out on the EMI. Once you fail to repay, the lender will liquidate your investment to recover their money and you won’t be able to do a thing. Hence, it is suggested to create a viable repayment plan in advance before applying for a loan.
In the end, just make sure you compare the different schemes available in the market before applying for either one of them.
Check the eligibility criteria for loan against security to find out your exact eligibility.
Use the facility only when required: It is always tempting to keep your mutual funds as your collateral to avail a loan against it. However, there’s a rule which everyone loan applicant is expected to abide by; apply for a loan only when it’s needed. In short, it is tempting but don’t mortgage your shares/ mutual funds or any other securities to purchase luxury items. The facility is and must be used only during an emergency.
Chalk out a viable repayment plan: Lastly, in order to avoid liquidation of your asset/ security by the lender, avoid missing out on the EMI. Once you fail to repay, the lender will liquidate your investment to recover their money and you won’t be able to do a thing. Hence, it is suggested to create a viable repayment plan in advance before applying for a loan.
In the end, just make sure you compare the different schemes available in the market before applying for either one of them.
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