Know the Difference: LAS V/S Conventional Loans

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Know the Difference: LAS V/S Conventional Loans

08 October, 2021



With unlimited financing options available in the market, people often look up loans for quick funding. According to The Week, India’s lending market saw a 100% growth from FY2017 to FY2021, the demand for loans is continuously rising, especially amongst young first-time borrowers. 

There are various categories of loans available in the market namely property loan, mortgage loan, gold loan and others. However, there is a lesser known loan product that allows you to keep your investments like shares, mutual fund units, debentures, bonds, etc. as collateral. They are known as Loan Against Securities or LAS. 

What is Loan Against Securities? 

LAS is a product where you can keep your investments as collateral and get a loan against it. With LAS, you can leverage your existing portfolio without having to sell it. In this product, the principal amount depends on the value of your investments. 

The best thing about LAS is that it provides you with flexible payment options through a dedicated overdraft or credit line facility. You only need to pay interest on the amount you utilise, and for the duration of loan. For example, if you withdrew Rs. 2,00,000 out of an overdraft of Rs. 5,00,000 which you repaid within 4 months, then you will have to pay monthly interest only on those 2 lakhs for 4 months. Simple. 

LAS is now available via digital mediums which makes taking and managing it easier. You don’t need to have a credit score or a stringent eligibility criteria to get a LAS. All you need is your DEMAT account and KYC proof. 

How Is LAS Different From Conventional Loans?

Due to the fact that they belong to the same category of finance products, people often mistake LAS for conventional loans. However, there are a number of differences that are overlooked between the features of these two products. Let’s take a brief look. 

 

FeaturesLASConventional Loans
CollateralsSecurities like shares, debentures, insurance, bonds, etcAssets like property, gold, car, etc.
PaymentFlexible payments for a principal amount in case of overdraft and monthly payment of interest dueUsually Monthly installments / EMI
Prepayment penaltyNoYes
Method of providing fundsCredit line or Overdraft facility, Term loan facilityUsually a Term Loan facility
Interest paymentInterest is paid only on the amount utilized at monthly intervalsInterest is applied on the outstanding amount and is usually included in the EMI
Documents requiredKYC documents , DEMAT accountVaries from loan to loan but basic criteria include Credit score, Employment proof, Asset proof, Proof of residence, etc.
ProcessEasy and quick processes, especially through digital mediumsStringent processes due to multiple background checks


Final Thoughts

LAS is a handy product that helps you leverage your existing investments. For example, by availing a loan against equity shares, instead of selling them, you can still get funds for your requirements while you keep owning the shares. So you can enjoy any upside gains as well as dividends will also accrue to you. 

You can use these funds to finance your business, consolidate an existing loan, for a medical emergency or for buying a house, the sky’s the limit. 

With spark.loans, LAS becomes even more convenient. We offer a complete digital experience through our mobile app. Get loans against shares at 1.24%* per month with flexible payment options and no prepayment penalty. You have complete control over your loans that you avail from spark.loans. 

Download our app to know more!

For more information on LAS visit our website. Follow us on FacebookInstagram and LinkedIn for more financial tips and updates.

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