Loan Against Shares & Loan Against Mutual Funds: The Guide to Smart Borrowing
By Anusha Rathore
What are LAS & LAM?
LAS (Loan Against Securities): A loan borrowed against the value of your stocks, bonds and other securities pledged as collateral. You retain ownership but cannot sell the pledged holdings until the loan is repaid.
LAM (Loan Against Mutual Funds): A loan borrowed against the value of your mutual fund holdings pledged as collateral. Similar to LAS, but specifically for mutual fund units. Both work on the same principle: leverage your existing portfolio to access funds without selling.
Key difference: LAS covers individual securities; LAM is specific to mutual funds.
What makes LAS & LAM attractive?
Unlike personal loans (12–18% interest), LAS/LAM rates hover at 9–11%, secured against your portfolio. You keep your holdings intact, avoid triggering capital gains tax, and retain upside if markets rise. It's ideal for consumption needs or strategic reinvestment, refinancing an expensive personal loan into a cheaper LAS, for example.
The Pros
- Lower rates: 2–3% cheaper than unsecured loans
- No tax trigger: Borrowing against holdings doesn't count as a 'sale'
- Quick approval: 24–48 hours with online KYC
- Flexible tenures: 6 months to 3+ years
- Retain upside: Your securities keep earning dividends/returns
The Cons (Know Before You Borrow)
- Margin call risk: If holdings fall 10–15%, banks force liquidation at market lows, locking in losses
- Liquidity mismatch: You are locked into repayment even if markets crash
- Hidden costs: Processing fees (0.5–1%), GST on interest, foreclosure charges
- Opportunity cost: If markets rally post-borrowing, you have borrowed at the wrong time
- Portfolio concentration: Pledging ₹50L in holdings limits flexibility
In a market downturn, you face a double hit: forced liquidation locks in losses on your holdings and you still owe the full loan amount with accrued interest. Example: Borrow ₹10L against ₹15L in holdings. Market falls 20%. Bank forces sale at ₹12L; you realize ₹3L loss instantly. But you still owe ₹10L loan + interest, creating a ₹13L+ total liability on assets now worth ₹12L.
Who Offers LAS & LAM in India?
Private banks, brokers, fintech firms—and rates vary by 0.5–1% across lenders.
The Bottom Line
LAS/LAM are powerful tools for salaried professionals who understand the risks. Don't use them to amplify leverage or time markets.
Ready to Explore LAS/LAM?
Compare rates and terms from India's leading lenders today.