When you need access to instant funds, you may be faced with the decision of whether to sell or liquidate your investments or take out a loan against securities (LAS). Both these scenarios seem practical at any emergent situation but it is always prudent to assess the pros and cons of each.. In this article, we will discuss the advantages and disadvantages of Loan Against Securities and help you decide which is the better choice for your financial needs.
Loan Against Securities (LAS)
A loan against securities is a type of loan that is secured by pledging your investments as collateral. The lender will assess the value of your securities and offer you a loan based on a percentage of that value. The loan amount and interest rate will depend on the type of securities being pledged, their value, and the lender’s policies.
Pros of LAS:
- Low-Interest Rates: Loans against securities often have lower interest rates compared to unsecured loans. For instance, Rurash Financials facilitates loans against securities from the most trusted lenders at interest rates as low as 9%.
- No Need to Sell Your Investments: When you take out a loan against securities, you don’t have to sell your investments. This means that you can keep your investments and still get access to funds when you need them.
- Easy and Convenient Documentation: Taking a loan against securities is a relatively simple process that involves minimal documentation. Rurash Financials, for example, offers an exhaustive list of 800+ approved securities, making the process even more convenient.
- Loan Tenure: With LAS, you can usually choose a loan tenure that suits your needs. This can range from a few months to a few years, depending on your requirements and sometimes the lender’s policies. But in any of the case, Loan Against Securities comes with ease of access and convenience.
Cons of LAS:
- Risk of Losing Your Securities: If you are unable to repay the loan, the lender may liquidate your securities to recover the funds. This could result in a loss of your investments.
- Limited Loan Amount: The loan amount that you can get with LAS is limited to a percentage of the value of your securities. This means that you may not be able to get the full value of your investments.
However, investors and businesses reach out to financial services companies like Rurash Financials that are providing access to the perfect overdraft facilities when they wish to generate funds more then the limitations of loan amount.The designated loan officers recommend and connect you the trusted lending partners to help you source funds from Rs.10 lacs to 100 Crore through loan against securities and shares.
Selling Your Investments
Selling your investments involves liquidating your assets and using the funds for your financial needs. This can be done through a broker or a trading platform.
Pros of Selling Your Investments:
- Immediate Funds: When you sell your investments, you get immediate access to funds. This can be helpful if you need funds urgently.
- No Risk of Losing Your Investments: When you sell your investments, you don’t have to worry about the risk of losing your securities. You get the full value of your investments, minus any fees or charges.
- No Interest Payments: When you sell your investments, you don’t have to worry about paying interest on a loan. This means that you can avoid the additional cost of interest payments.
Cons of Selling Your Investments:
Missed Opportunity for Future Growth: When you sell your investments, you miss out on any potential future growth. This means that you may not get the full value of your investments in the long run.
Tax Implications: Selling your investments can have use income tax implications. You may have to pay capital gains tax on the profits that you make from the sale.
Which Option Is Better?
The decision to take a loan against securities or sell your investments will depend on your financial needs and circumstances. If you need immediate funds and don’t want to risk losing your investments, selling your investments may be the better option. However, if you want to keep your investments and get access to funds at a lower interest rate, taking out a loan against securities may be the better choice and its certainly wiser.
Additionally, it’s important to consider the long-term implications of both options. If you sell your investments, you may miss out on future growth, which could impact your financial goals in the long run.
