Loan Against Mutual Funds
A loan against mutual funds is a type of loan where you pledge your mutual fund units as collateral to obtain funds from the lender.Your mutual funds will continue to earn returns ,but you cannot sell them while they are pledged.
When you pledge an asset ,you are offering it as a security to the lender in exchange of the loan amount.By pledging the borrower gives the lender the right to take ownership of the assets if the borrower fails to repay the loan as per the agreed terms and condition.
Lien marking refers to the process of marking or freezing the pledged securities in the borrower’s account.By placing a lien on the securities,the lender protects their interest in the collateral.If the borrower defaults on the loan,the lender has the right to sell the pledged securities to recover the outstanding loan amount.
Loan against mutual funds is available for mutual funds offered by various assets management companies(AMCs)in India. However ,Equity Linked Saving Scheme(ELSS) funds with a date of purchase of less than 3 years are not eligible for loan.
You may check the List of scheme in our Eligibility Page.
Yes, we at Lark allow the borrower to lien mark the mutual funds of their choice in their portfolio. The borrower can change the schemes and units and have their own allocation for lien marking.
Once the borrower repays the full loan amount we un lien mark the securities.
If market value of Mutual fund fall, the borrower will be informed about the margin shortage, the margin should be maintained all the time as per the LTV calculations. The short margin can be fulfilled either by repaying the Loan or pledging more Mutual Fund in favour of Lender. If market value of shares falls below bare minimum margin criteria, the lender can invoke the securities.
Loan Against Stocks
A loan against shares is a financial arrangement where the borrower uses their investment portfolio as collateral to obtain a loan from a financial institution. Loan against shares can be an attractive option for individuals who have an investment portfolio but require liquidity for various purposes without selling the share portfolio.
Some advantages of loans against securities include:
- Access to liquidity without selling investments.
- Potential tax advantages compared to selling securities.
- Retaining ownership and potential gains from the pledged securities.
- Flexibility in using the loan funds for various purposes.
The borrower retains the ownership of the pledged securities during the loan period and continues to receive any dividends or interest payments associated with them. However, if the borrower defaults on the loan, the lender has the right to sell the securities to recover the outstanding amount.
Please find below the list of shares eligible for loan against securities
We support brokers registered with NSDL.
As soon as the borrower pays the outstanding amount, the pledge is removed.
If market value of shares fall, the borrower will be informed about the margin shortage, the margin should be maintained all the time as per the LTV calculations. The short margin can be fulfilled either by repaying the Loan or pledging more shares in favour. If market value of shares falls below bare minimum margin criteria, the lender can invoke the securities.
Loan Against Insurance Policies
Loan against insurance policy is a financial optional available to the policyholders of life insurance policies. These policies accumulate a cash value over time, which policyholders can use as a collateral to borrow against.
The loan amount is equal to 80% of the surrender value of the policy. At Lark the maximum loan amount is the 80% surrender value or Rs.1000000 whichever is lower.
When a policyholder takes a loan against their policy, the insurance company uses the cash value as collateral. This, means that the death benefit of the policy is reduced by the outstanding loan amount. If the policyholder passes away before repaying the loan, the insurance company will deduct the loan balance from the death benefit paid to the beneficiaries.
At Lark, loan against insurance policy can be given for a maximum tenure of 12 months and the repayment will be on EMI based model.
No, policy loans are not available for all types of insurance policies. Term life insurance policies do not accumulate cash value and therefore are not eligible.
The borrower must be a resident of India.
He must be between 18-65 years of age.
The borrower must hold a valid insurance policy having a surrender value of at least Rs.20000.
The policy should be held in the digitalised form.