Loan Against Securities
loan against securities
Borrowing against your portfolio, not selling it
A loan against securities is a secured loan. You pledge holdings you already own — mutual fund units, listed shares, ETFs — as collateral, and borrow against their value. When the collateral is fund units it is often called a loan against mutual funds; the mechanism is the same.
your holdings stay invested
You keep the units. Whatever they earn or lose while the loan runs is still yours, and no sale is triggered.
but the pledge is real
Pledged holdings are locked. You cannot sell or switch them while the loan is outstanding, and the lender can sell them if you default.
at a glance
How this one behaves
The only borrowing product on this site. It raises risk rather than lowering it, and the loan-to-value ratio is where that risk lives.
- What it is
- A secured loan, not an investment
- Secured on
- Mutual fund units, listed shares or ETFs you already own
- Loan-to-value
- Commonly 35% to 80% of market value, set by the lender
- The risk that matters
- A fall in value can force a top-up — or a sale of the pledge
how it works
The loan-to-value ratio is the whole mechanism
You pledge eligible holdings in favour of a lender — a bank or an NBFC. A lien is marked against those units or shares with the registrar or the depository, so they remain in your name but can no longer be moved by you. Against that collateral the lender sanctions a credit limit, usually as an overdraft you can draw on as needed rather than a lump sum paid out at once.
The size of that limit is set by the loan-to-value ratio: the percentage of current market value the lender is willing to advance. It varies with the collateral and with the lender’s own policy, commonly somewhere between around 35% and 80%. Steadier collateral such as debt fund units attracts a higher percentage than equity, because the lender is pricing how far the value might fall before they can act.
That percentage is the part most borrowers underestimate, because it is measured continuously, not once. Your limit is a proportion of what the collateral is worth today. If markets fall and the value of the pledged holdings drops far enough that your outstanding balance breaches the agreed ratio, the lender issues a margin call. You are then required to pledge additional securities or repay part of the loan, usually within a short and specified window. If you do not, the lender is entitled to sell the pledged holdings to bring the ratio back into line — at whatever price the market is offering, which by definition is a poor one, because the fall in prices is what triggered the call.
Interest is charged on what you actually draw rather than on the whole sanctioned limit, which is why the overdraft structure suits short and uneven requirements. Rates are generally lower than on unsecured personal borrowing, because the lender holds collateral. Tenure, repayment structure, processing charges and the list of eligible securities are set by each lender and differ between them.
The arithmetic worth sitting with is this: the loan is fixed and the collateral is not. If the pledged portfolio falls 20%, the debt does not fall with it. Your own equity in the position absorbs the entire decline, so a borrowed position loses more, proportionally, than an unborrowed one. Leverage widens the outcome in both directions, and the interest accrues either way.
Used well, it solves a specific problem: a short-term need for cash where selling would mean exiting a position you want to keep, realising a gain you would rather defer, or disrupting a long-term plan for a temporary requirement. Used poorly — to borrow against a portfolio in order to buy more of the same kind of asset — it stacks leverage on leverage, and the margin call arrives precisely when everything you own is already down.
risk
What can go wrong
This is the only borrowing product on this site, and it carries risks the investment categories do not. These are the ones that matter.
margin call and forced sale
If the pledged holdings fall in value, the lender can require you to top up or repay at short notice — and can sell those holdings if you cannot.
leverage cuts both ways
The debt is fixed; the collateral is not. A falling portfolio therefore costs a borrower more than it costs someone who has not borrowed against it.
cost regardless of outcome
Interest accrues whether the pledged holdings rise, fall or do nothing. Borrowing only makes sense if the use of the money justifies its cost.
faqs
Questions about loans against securities
No. A pledge is not a sale — the holdings remain in your name and continue to participate in the market. That is the main reason people use this route rather than redeeming. It also means you now hold both the investment and a debt against it, which is a materially different position from holding the investment alone. How any of it is treated for tax depends on your circumstances; please take that up with your tax adviser rather than assuming.
Your borrowing limit is a percentage of what the collateral is currently worth, so a fall in value shrinks it. If your outstanding balance breaches the agreed loan-to-value ratio, the lender issues a margin call and you must either pledge more securities or repay part of the loan within a short window. If you do neither, the lender can sell the pledged holdings. This is the single most important thing to understand before pledging anything.
Not while the lien is in place. Pledged holdings are frozen for transactions — you cannot redeem, switch or transfer them until the loan is repaid and the lender releases the lien. Plan around that: do not pledge the part of your portfolio you may need to rebalance or draw on.
Both depend on the lender and on what you pledge. The limit is a percentage of current market value — commonly somewhere between around 35% and 80%, with steadier collateral attracting a higher percentage than equity. Rates are generally below unsecured personal borrowing because the loan is secured, but they are set by each lender and change. Eligible securities, tenure, charges and margin-call terms also differ between lenders, so the terms sheet matters more than the headline rate.
The loan is provided by a bank or NBFC, not by KD Finvest — we do not lend and we do not hold your money or your securities. The specific lenders we can approach, and the exact nature of our role in arranging an introduction, are TO_BE_CONFIRMED and will be stated here in full. Please ask us directly in the meantime.
Risk and important information
A loan against securities is borrowing, not an investment, and it increases risk rather than reducing it. Pledged holdings are encumbered and cannot be sold or switched while the loan is outstanding. If their market value falls, the lender may require additional collateral or immediate part-repayment at short notice and may sell the pledged holdings to recover its dues, potentially at an unfavourable price and potentially crystallising a loss. Interest accrues regardless of how the pledged holdings perform, and borrowing against a portfolio amplifies losses as well as gains. Loan-to-value ratios, interest rates, tenure, eligible securities, charges and margin-call terms are set by the lender and vary. Sanction is at the lender’s discretion and subject to its own eligibility criteria. Please read the loan agreement and all associated documents carefully before pledging any holding. Nothing on this page is investment advice, credit advice or a recommendation to borrow.
let's talk
Let's start with a conversation
There's no obligation, no pressure — just a conversation about where things stand and where you'd like to go.