Loan Against Securities (LAS): How It Works and How to Apply
A loan against securities is a financial product that lets you use your investments, mutual funds or stocks as collateral to secure a loan. It offers a quick, flexible way to access funds without liquidating your portfolio. This article covers how loans against securities work on smallcase, the two products now available, and how to apply for each.
What is Loan Against Securities (LAS)?
A loan against securities (LAS) is a type of secured loan where you pledge your securities — such as mutual funds or listed stocks- as collateral. You retain ownership of your investments throughout the loan tenure while borrowing against their market value. smallcase currently offers two LAS products: Loan Against Mutual Funds (LAMF) and Loan Against Stocks (LAS).
How to Apply for LAS via smallcase?
Loan Against Mutual Funds
- Log in to smallcase Credit: Visit smallcase Credit and click on ‘Against Mutual Funds’ to check your credit limit.
- Check eligible funds: View SBI mutual funds and other eligible holdings available for pledging.
- Select funds to pledge: Choose funds as collateral and check the credit limit.
- Link your bank account: Add bank details for disbursement and set up an e-mandate.
- Pledge your mutual funds: Selected units are lien-marked while staying in your folio or demat account.
- Sign the loan agreement: Review, verify with OTP, and sign online.
- Receive the loan amount: The amount is usually credited within 2 working hours after signing.
Loan Against Stocks (LAS)
- Log in to smallcase Credit: Visit smallcase Credit and click on ‘Against Stocks’ to check your credit limit.
- Check eligible stocks: View the listed equity holdings in your demat account that are available for pledging.
- Select stocks to pledge: Choose the shares you want to use as collateral and confirm your credit limit.
- Link your bank account: Add your bank details for disbursement and set up an e-mandate for monthly interest auto-debit.
- Pledge your stocks: Selected shares are lien-marked in favour of the lender while remaining in your demat account.
- Sign the loan agreement: Review the terms, verify with OTP, and sign the agreement online.
- Receive the loan amount: Funds are typically credited to your bank account within 2 working hours after signing.
Advantages of Applying for a Loan Against Securities
Lower interest rate
Because your securities serve as collateral, lenders carry less risk and can offer more competitive rates than unsecured loans. On smallcase, the interest rate for LAMF starts at 9.99% p.a., which is significantly lower than typical personal loan rates.
Simple eligibility criteria
To apply, you need to be an Indian citizen aged between 18 and 70 years and hold eligible mutual fund or stock holdings in your account.
24×7 account access
Once your loan is active, you have round-the-clock access to your loan dashboard to check your balance, track repayments, or reach customer support.
Flexible repayment
You pay only monthly interest on the outstanding amount, keeping your EMIs low. There are no foreclosure or prepayment charges, so you can close the loan before the 36-month tenure ends without any penalty.
Revolving credit line
LAS functions as a credit line — once you repay the principal, your credit limit is reinstated. You can withdraw again from ₹1,000 upwards without reapplying.
Interest Rate & Processing Fees
Both LAS products on smallcase charge interest only on the amount you withdraw, not the full sanctioned credit limit. This makes them function more like an overdraft facility than a term loan and you pay for what you use.
Loan Against Mutual Funds (LAMF) — Fees and Charges
The interest rate on LAMF via smallcase starts at 9.99% p.a. Monthly interest is auto-debited from your linked bank account. The principal can be repaid at any point within the 36-month tenure with no foreclosure penalty.
| Fee type | Applicable charges |
| Interest rate | Starts at 9.99% p.a. |
| Processing fee | ₹999 or 1% of loan amount (whichever is higher), up to a maximum of ₹4,999 + GST |
| Late payment interest | 2% per month (penal) on overdue amount |
| Demat pledge charges | Lender (Bajaj Finance): ₹50 + GST per security; Zerodha: ₹32 + GST per security |
| Bounce charges | ₹1,200 per bounce |
| Part-prepayment charges | Nil |
| Foreclosure charges | Nil |
| Mandate inactive charges | Nil |
| Mandate verification (bank) | As charged by your bank (typically ₹0–₹150) |
| Lien removal (after loan is active) | Nil |
| Lien removal (if loan cancelled before disbursement) | Actual processing fee applicable |
| Demat lien invocation (in case of default) | 0.02% + ₹5 + GST per security (min ₹55, max ₹1,005) |
| Demat share transfer charges | 0.02% + ₹5 + GST per security (min ₹55, max ₹1,005) |
| Stamp duty | 0.015% on demat lien invocation value |
| Collection/legal charges (in case of default) | At actuals |
Loan Against Stocks (LAS) — Fees and Charges
The interest rate on Loan Against Stocks via smallcase is 10.25% p.a.. As with LAMF, interest is charged only on the withdrawn amount, and there are no foreclosure or prepayment charges. For the complete schedule of applicable charges, click here.
What Happens to Your Securities While Pledged?
Whether you pledge mutual funds or stocks, the securities are lien-marked in favour of the lender for the loan duration. You cannot sell or redeem pledged securities until the loan is closed. However, you can continue to invest in additional units or securities. Once all outstanding dues are repaid and the loan is closed, the pledge is released.
If the value of pledged securities drops significantly, the outstanding loan amount must remain within the allowed loan-to-value ratio. If it exceeds this threshold, you will need to repay a portion of the principal to bring the loan back within permissible limits, or risk the lender liquidating sufficient securities after due notice.
Things to Consider Before Taking a Loan Against Securities
- Monitor your collateral value. The loan amount you can draw is tied to the current market value of your pledged holdings. A significant market correction can reduce your eligible limit or trigger a margin shortfall, requiring you to repay a portion of the outstanding principal.
- Understand the LTV ratios. For LAMF, the loan-to-value is 45% for equity mutual funds and 75% for debt mutual funds. For Loan Against Stocks, the LTV varies by security. Borrowing close to the maximum limit leaves little buffer if valuations fall.
- Factor in processing fees. The processing fee for LAMF on smallcase is ₹999 or 1% of the loan amount, whichever is higher, up to ₹4,999 plus GST. This is a one-time charge on each loan application.
- Do not miss monthly interest payments. Monthly interest is auto-debited via e-mandate. A failed payment attracts a bounce charge of ₹1,200 and a penal interest of 1.5% per month on the overdue amount. Keep sufficient balance in your linked account around the auto-debit date.
- Joint account holders cannot apply. For LAMF, mutual funds held in joint accounts are not eligible, as the digital pledging process currently does not support joint holding verification.
Conclusion
Loans against securities, whether mutual funds or stocks, give you access to liquidity without disrupting your investment strategy. With competitive interest rates, no foreclosure charges, and a fully digital application process, smallcase’s LAS products are worth considering for short-term funds. Always review the processing fees, LTV ratios, and repayment terms before applying.
All About Loan Against Securities & Loan Against Mutual Funds on smallcase –
smallcase offers quick and easy disbursement of loans against mutual funds ( LAMF). Explore all about the eligibility criteria, documents required, features, and benefits of a Loan against mutual funds on smallcase
Frequently Asked Questions About LAS
At smallcase, you can pledge a range of mutual fund holdings and stocks as collateral.
Both are forms of LAS — the difference is the collateral. LAMF uses mutual fund holdings as collateral, while Loan Against Stocks uses listed equity shares and ETFs held in your demat account. The LTV ratios, eligible securities list, and specific terms may differ between the two products.
The loan amount depends on the value of the mutual funds you will keep as collateral. You can avail a loan against mutual funds from ₹25,000 onwards.
Yes. Pledging does not transfer ownership. For LAMF, your mutual funds remain in your folio and continue to earn returns and dividends. For Loan Against Stocks, your shares stay in your demat account and you continue to receive dividends and benefit from corporate actions such as bonuses and splits. The only restriction is that you cannot sell or redeem pledged holdings until the loan is closed.
No, there are no prepayment penalties or foreclosure charges for loans against mutual funds or stocks at smallcase.
For LAMF, the default tenure is 36 months. If the outstanding principal is not repaid by the end of the tenure, the lender may liquidate your pledged mutual funds to recover the dues after giving you prior notice.
Once your application is approved and the process is complete, the funds are typically disbursed to your bank account within a few hours.
When you repay part or all of the principal, your credit limit is reinstated. You can then withdraw any amount starting from ₹1,000 up to the total repaid principal, without needing to apply for a new loan. Interest is charged monthly on the amount withdrawn.
