• You pledge assets: You provide your financial institution with certain investments as security. These can be things like stocks, mutual funds, bonds, or even life insurance policies with a cash value.

• They lend you money: Based on the value of your pledged assets, the lender will give you a loan amount, typically up to a certain percentage (like 50% or 80%) of the asset's value.

• You repay the loan: You'll make interest payments on the borrowed amount, and eventually repay the loan in full.

 

 

• Access cash without selling: Unlike selling your investments, you can get cash without having to give up ownership of your assets. This can be helpful if you need money for a short-term need but still believe in the long-term potential of your investments.

• Potentially lower interest rates: Loan against security interest rates tend to be lower than those on unsecured loans like personal loans or credit cards. This is because the lender has your securities as collateral, reducing their risk.

• Flexible repayment options: Some lenders offer flexible repayment options, allowing you to just pay the interest initially and defer principal repayment until later.

 

 

• Margin calls: If the value of your pledged assets falls significantly, the lender may issue a margin call, requiring you to deposit additional cash or securities to maintain the loan-to-value ratio. Failure to meet a margin call could result in the lender selling your assets to recoup their losses.

• Risk of losing your assets: If you default on the loan, the lender has the right to sell your pledged assets to repay the debt.

• Not for long-term needs: Loans against security are typically best for short-term needs, as the value of your investments can fluctuate.

Thinking about a loan against security?

 

It's important to carefully consider your options and ensure you understand the risks involved. Talk to us to see if a loan against security is the right choice for you