Check out the Loan Against Shares Eligibility Criteria

The Loan Against Shares (LAS) is a facility extended by financial institutions to its customers to avail a loan using their shares as collateral. It enables the borrowers to obtain quick funds on a temporary basis. The eligibility criteria for Loan Against Shares vary from lender to lender but some general requirements that might be considered are:

1. Shareholding conditions: It's a prerequisite to have shares in listed companies to avail of a LAS facility. Different lending institutions may have a minimum shareholding requirement, which may vary from 50% to 75%. Also, it is essential to note if the shares are dematerialized for availing of this facility.

2. Credibility Check: The lending institution verifies the creditworthiness of the borrower before approving the loan. Credit score, previous loan repayment history, and financial status can fall into a lender's checklist. The high credit score and good track record of payback increase the borrower's chances of obtaining a loan.

3. Age-based Criteria: The age of the borrower is a critical aspect while determining the Loan Against Shares eligibility. The ideal age range for applying for the loan is typically between 18-65 years. However, each lending institution may have specific age-related restrictions.

4. Margin Requirements: Lending institutions offer loans against shares usually up to a certain percentage of the market value of shares. Hence, the margin requirement varies from lender to lender. The borrower must maintain an adequate margin, which ensures that the collateral value remains above the value of the loan.

5. Market Risk Management: The valuation of securities and shares is a function of market volatility and demand-supply conditions. Therefore, the lenders also consider the market risks and fluctuations affecting the stock prices. In case of sharp market movements, the lender may ask for additional margin or collateral securities.

In conclusion, the eligibility criteria for a Loan Against Shares depend on the lending institution's policies and regulations. Generally, one should be a shareholder of listed companies, possess a creditworthy reputation, and meet the age-based criteria. The loan amount offered under LAS usually ranges from 50-75% of the market value of shares. The interest rates charged on such loans are higher than traditional loans, and the tenures are comparatively shorter. The loan against shares facility provides short-term liquidity to individuals availing it and is an excellent opportunity for investors to monetise their long-term investments. However, borrowers should read and understand the terms and conditions of the lender's loan agreement before availing of this facility. In case of default or market changes, LAS can lead to a loss of invested shares. It is advisable to consult with financial advisors before availing of any loan or investment facility.