Loan Against Bonds

A Loan Against Bonds is a type of loan where people use their bonds as security for a loan, allowing them to access money without selling the bonds. They offer the bonds to a lender, who checks their value and lends a portion of that value. The borrower keeps owning the bonds while using them to get the loan, enjoying potentially lower interest rates than unsecured loans.

Similarly, Loan Against Bonds and Debentures means using both bonds and debentures as collateral for a loan. Bonds and debentures are types of loan entities used to raise funds. By pledging these securities, holders can get loans based on their value while keeping ownership of them. Bonds can be secured or unsecured, while debentures are typically unsecured debt instruments.

Before going for Loan against bonds, go through the webpage to gain more insights!

Why Take a Loan Against Bonds

Taking a Loan Against Bonds allows access to funds without selling investments. Using bonds as collateral secures the loan while maintaining ownership. Overall, taking a Loan Against Bonds offers several advantages:

  • Maintain Ownership: Borrowers retain ownership of their bonds while accessing funds, allowing them to benefit from potential future gains or income generated by the investments.
  • Liquidity Without Selling: It provides access to funds without liquidating the bond holdings, ensuring continued participation in the bond market's potential growth.
  • Lower Interest Rates: These loans typically offer lower interest rates compared to unsecured loans, leading to potential cost savings on interest payments.
  • Quick Access to Funds: The evaluation process is streamlined, as the value of the bonds is easily assessable, enabling a swift and convenient means to get funds.
  • Financial Flexibility: Borrowers can use the loaned amount for various purposes, enhancing financial maneuverability without compromising their bond investments.

Interest Rates for Loan Against Bonds

Before opting for a loan against bonds, it's wise to research and analyze associated charges. Refer to the table below to know the interest rates and fees help in selecting the best terms for your financial needs.

Types of fees Charges
Interest Rate Up to 20% annum
Processing Fee Up to 4.72% of the loan amount

Top Banks Providing Loans Against Bonds

Several leading banks and financial institutions offer Loan Against Bonds, providing individuals with opportunities to leverage their bond investments for accessing funds. These institutions, including major banks such as SBI, HDFC, and Axis Bank, among others, extend such facilities, allowing customers to use their bonds as collateral to secure loans. Hence, refer to the table below to know more about interest rates associated with these banks.

Lender Interest Rate Loan to Value Ratio Min. Loan Amount
SBI 8.40% - 10.55% Up to 75% ₹10,000
HDFC Bank 9.75% - 13.00% Up to 75% ₹25,000
Axis Bank 9.00% - 13.25% Up to 75% ₹50,000
Bajaj Finserv 9.65% - 20.00% Up to 75% ₹10,000

Read More

Read Less

Eligibility Criteria For Loan Against Bonds

To qualify for a Loan Against Bonds, here are the certain eligibility criteria that need to fulfilled:

  • Nationality: Indian citizenship
  • Age: 18 to 65 years
  • Employment status: Salaried or self-employed

Not sure of your credit score? Check now for free!

Check Your Credit Score for Free

Also get a Free Credit Report

Documents Required For Availing Loan Against Bonds

Please note that this list of required documents serves as a guideline to help you complete a list of necessary documents while assisting you with the application process.

  • KYC documents: Aadhaar card, passport, or voter's ID
  • PAN card
  • DEMAT holding statement
  • Additional documents may be requested by Bajaj Financial Limited.

Features & Benefits of Loan Against Bonds

Here are the features that make loans against bonds a convenient option for individuals and entities to leverage their marketable assets for financial support while maintaining flexibility and ease of access to funds

  • Providers: Offered by banks, NBFCs, and various financial institutions.
  • Eligibility: Available for Resident Indians, and some institutions extend to entities like HUFs, partnership firms, limited companies, etc., based on their securities' eligibility.
  • NRI Eligibility: Non-resident individuals can avail of funding against equity, debt mutual funds, or shares held in their names.
  • Loan Value: Determined based on the cash value of the securities provided.
  • Preferred Securities: Marketable, transferable, and liquid assets are preferred as collateral.
  • Stability of Security Value: While security values can fluctuate, they should remain relatively stable to avoid significant losses.
  • Loan Type: Typically offered as an overdraft facility.
  • Flexibility: Flexible withdrawal, tenure, and repayment schedules are available.
  • Charges: Fees may include overdraft account maintenance charges, processing fees, and stamp duty for loan agreements.
  • Banking Facilities: ATM and internet banking facilities are often available for managing the overdraft facility.

Do you need an instant loan?

Loan Amount for Loan Against Bonds

To, calculate the loan amount for a Loan Against Bonds, you can use the formula:

Loan Amount = Value of Bonds × Loan-to-Value (LTV) Ratio

The Loan-to-Value (LTV) ratio represents the percentage of the value of the bonds that the lender will offer as a loan. LTV ratios can vary between different lenders, typically ranging from 50% to 80% of the bond's value.

For example, if you have bonds valued at 25 lakhs and the lender offers an LTV ratio of 60%, here's how you can calculate the loan amount:

Loan Amount = 25 lakhs × 60%
Loan Amount = 25 lakhs × 0.60
Loan Amount = 15 lakhs

Therefore, based on the 60% LTV ratio, with bonds valued at 25 lakhs, you might secure a loan of 15 lakhs.

Types of Loan Against Bonds

Here are the various loans against bonds that offer flexibility to access funds, repayment structures, and interest rate options, catering to the specific requirements and preferences of borrowers.

Secured Loans Against Bonds: These loans are secured by the bonds held as collateral, allowing borrowers to access funds while keeping the bonds as security. The loan amount is determined based on the value of the pledged bonds.

Term Loans Against Bonds: This type of loan provides a lump sum amount based on the value of the bonds. Borrowers repay the loan amount along with interest over a specified period, usually in installments.

Lines of Credit/Overdraft Against Bonds: Some lenders offer lines of credit or overdraft facilities where borrowers can draw funds against their bonds as and when needed. Interest is charged only on the amount utilized.

Asset-Based Loans Against Bonds: In this type of loan, bonds are used as part of a broader asset portfolio as collateral. The loan amount might be based on the combined value of various assets, including bonds.

Bridge Loans Against Bonds: These short-term loans provide immediate funds while waiting for a more extended financing option or until the sale of bonds or other assets. They are often used for interim financial needs.

Fixed-Rate or Floating-Rate Loans Against Bonds: Borrowers may be able to choose between fixed-rate loans with a constant interest rate throughout the loan term or floating-rate loans with rates that vary based on market conditions.

How To Apply For Loan Against Bonds

Here is the quick, simple process that will guide applicants through providing the necessary details for a loan against bonds, ensuring a seamless application experience.

  1. Start Application: Click on 'Apply' to start your application process.
  2. Mobile Number Verification: Enter your mobile number, click 'GET OTP,' and enter the received OTP for verification.
  3. Form Submission: Once verified, fill in basic details like your full name, email, mobile number, and city of residence.
  4. Select Security Type: Choose 'Bonds' under the 'Type of Security' section.
  5. Enter Bond Portfolio Value: Input the total value of your bond portfolio and click 'Submit.'
  6. Follow-Up: After expressing interest and submitting details, our representative will contact you for further steps.
  7. Loan Calculation: The final loan amount is calculated based on the effective pledge marked on the bonds and their current price.
  8. Disbursement: After successful verification and pledging, the loan amount will be disbursed.

Looking for a personal loan?

Frequently Asked Questions

A loan against bonds and debentures is a type of secured loan where you pledge your bonds or debentures as collateral to obtain funds from a financial institution. Instead of selling these securities, you use them as security to borrow money.

You can typically use various types of bonds and debentures, including government bonds, corporate bonds, municipal bonds, and other investment-grade securities, as collateral for such loans.

When you apply for this loan, the lending institution evaluates the quality and value of your bonds or debentures. Based on their assessment, they offer you a loan amount, usually a percentage of the value of the securities pledged. You continue to own the bonds, but the lender holds them as collateral until you repay the loan.

The loan-to-value (LTV) ratio for such loans can vary but typically ranges between 50% to 80% of the value of the bonds or debentures used as collateral.

- Lower interest rates compared to unsecured loans

- Access to quick funds without selling your securities

- Retention of ownership of the bonds or debentures

- If the borrower defaults, the lender may liquidate the pledged securities.

- Fluctuations in the value of the securities can impact the loan terms.

- Failure to repay the loan may result in losing ownership of the securities.

The value is typically determined based on factors like the type, quality, market conditions, and prevailing interest rates. The lender usually has their valuation methods.

Documents required often include identification proof, proof of ownership of the bonds or debentures, valuation certificates, loan application forms, and sometimes additional financial documents.

Interest rates can vary but are often lower than rates for unsecured loans due to the collateral. Rates are influenced by market conditions, the quality of the securities, and the lender's policies.

Yes, you typically continue to receive interest payments on your bonds or debentures unless specified otherwise in the loan agreement. However, these payments might be used to service the loan interest or repay the principal, depending on the terms of the loan.

Display of trademarks, trade names, logos, and other subject matters of Intellectual Property displayed on this website belongs to their respective intellectual property owners & is not owned by Bvalue Services Pvt. Ltd. Display of such Intellectual Property and related product information does not imply Bvalue Services Pvt. Ltd company’s partnership with the owner of the Intellectual Property or proprietor of such products.

Please read the Terms & Conditions carefully as deemed & proceed at your own discretion.