Loan Against Securities

How LAS works

You pledge approved equity, mutual fund or bond holdings as collateral; the lender opens an overdraft line of 50–65% LTV against the portfolio's mark-to-market value. Interest accrues only on the drawn amount — like a credit card, but at 8–12% p.a. instead of 36%. You keep ownership, continue to receive dividends and capital appreciation, and avoid the capital gains tax that selling would trigger.

Worked example

You hold a ₹40 lakh mutual-fund portfolio (Nifty 50 index funds). HDFC Bank offers 50% LTV at 10.5% interest, giving you a ₹20 lakh overdraft. You draw ₹6 lakh for a 9-month medical emergency. Interest = ₹6L × 10.5% × 9/12 = ₹47,250. Compare against selling ₹6L worth of units: 12.5% LTCG on roughly ₹1.5L of embedded gains = ₹18,750 tax, plus you lose ~6 years of compounding on that corpus. LAS is cheaper when the holding period horizon is long.

When to use this

• Bridging a 6–18 month liquidity gap (medical, home down-payment, business working capital)
• Avoiding a forced sale during a market drawdown when the portfolio is down 20%+
• Replacing a 14–16% personal loan with collateralised debt at half the rate

Watch for margin calls — if the equity portfolio drops sharply, the lender can demand a top-up within 24–48 hours or auto-sell pledged units. Compare with the EMI vs personal loan tool to see when LAS dominates.