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Sneha Balasubramanian made post

Do shares continue to be held in the borrower’s name on taking a loan against securities? Or does the lender own them?

Answer
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Tarun Madaan answered.
2 years ago


Let’s understand the concept of loan against securities/shares (LAS) before answering your question.

LAS is a loan a borrower can enjoy by pledging his/her investment in favour of the lender. It is often used to fund urgent, unexpected expenses without selling investments in distress.

In LAS, a lender gives you a loan against securities held by you. Thus, this is a secured loan as the lender has the collateral of your shares/securities, if you do not pay back or default on your loan.

Thus, by taking a loan against securities (LAS), you only pledge your stocks or securities. You DO NOT sell off your securities. This is why, LAS is the ideal way to get liquidity or liquid cash, without liquidating (or selling) your stocks or securities.

Hence, the lender only takes your securities for the time being while the share continues being in your name. A LAS lets you reap your regular benefits from shares such as rights, dividends and bonuses whilst you take a loan against them.