What does the loan against shares mean?

Answer 1

A loan against shares (LAS) is a type of secured loan where you pledge your shares as collateral to borrow money, instead of selling them.

In simple terms:

• You keep ownership of your investments
• You temporarily “lock” (pledge) them
• The lender gives you a loan based on their value

How it works

• Your shares or mutual funds are marked with a lien (pledged)
• The lender gives you a loan based on a percentage of their value (called LTV – Loan-to-Value)
• You pay interest on the loan
• Once repaid, your investments are released

Example using Mutual Funds

Let’s say:

You have ₹10 lakh invested in equity mutual funds

A lender offers 50% LTV

You can get a loan of up to ₹5 lakh

Now:

Your mutual funds remain invested in the market

You continue to earn returns (if markets go up)

You pay interest only on the borrowed amount

Why people choose this

No need to sell investments (avoid exit load or tax)

Faster than personal loans

Lower interest rates (because it’s secured)

Important risk (don’t ignore this)

If the market falls:

Your mutual fund value drops

Lender may ask for more collateral (margin call)

If you don’t comply, they can sell your units to recover the loan

Shares vs Mutual Funds (quick difference)

Shares: More volatile → lower LTV, higher risk

Mutual funds: More diversified → slightly safer collateral

Bottom line

A loan against shares (or mutual funds) is basically borrowing money using your investments without selling them — useful for short-term liquidity, but it comes with market risk.

For more details, you can visit BULWARK CAPITAL.

Answer 2

Loan against Securities is a type of loan where securities like shares, Mutual Funds, term deposits, NSC certificates, etc. are used as collateral. While some banks might require your securities to be liquidated, others give you the option of taking a loan without liquidating your investments.