What is a Loan Against Bonds?
Definition and Meaning

A financial crisis may arise at any time. In the event of such a scenario, it helps to have a backup plan in place. Fortunately, depending upon the urgency and need of the circumstances, you can raise capital from several avenues.

If the money you require is urgent and small, you can apply for a loan against bonds. As long as the borrower meets the eligibility criteria, many lenders offer loans against bonds.

By availing a loan against securities, you will be able to successfully tackle any emergency without having to liquidate your savings.

How Does a Loan Against Bonds Work?

When you avail a loan against bonds, it enables you to finance your needs in a timely fashion without compromising your investments. Depending upon the value of the bond that you have pledged and your overall eligibility, the lender will offer you a limit for a certain amount.

You can borrow a part or the entire amount of this limit, and repay it within an agreed-upon time frame through EMIs. Each time you pay the EMI, the principal component of the same gets added back to the limit and once again becomes available for borrowing.

Interest is charged only on the amount that is withdrawn /utilized.

Taking a loan against bonds is doubly advantageous:

1. You can get ready cash to meet your financial constraints. This is an especially excellent tool for business owners to manage their short-term working capital needs.
2. Since the interest rates are lower than those of payday loans, it is also an excellent option for salaried borrowers who need a small amount of money that they can easily repay in a short time period.

What are the Features of a Loan Against Bonds?

The terms and conditions of loans that are issued to borrowers vary across financial institutions. The following are broadly the features of a loan against bonds:

• Any loan that you take against a bond is a secured loan with the bond acting as the collateral.
• Typically, the tenure of the loan extends up to one year. The maximum tenure for repaying the withdrawn amount depends on the lender’s policy and can be renewed.
• SMFG India Credit offers loan against securities at attractive interest rates starting from 10% per annum. The final rate offered to you will depend on our policy and your overall eligibility.
• The borrower has to pay a processing fee which is up to 3% of the loan amount.
• The limit sanctioned depends upon the value of the bond as well as your overall eligibility.
• To apply for a loan against bonds, borrowers have to be between 18 - 65 years of age.

Must Read: 5 Tips to Qualify for Loan Against Securities

What are the Eligibility Criteria?

A borrower must broadly fulfill the following eligibility criteria to apply for a loan against bonds:

• The borrower has to be an Indian resident between 21-60 years of age. 
• He/she should either be self-employed or a salaried individual.
• He/she should meet the minimum monthly income criteria as per the nature of their profession
• He/she should have a good CIBIL score and history.

What are the Documents Required to Seek a Loan Against Bonds?

Self-employed and salaried borrowers have to submit different loan against securities documentation to avail a loan against bonds. Self-employed borrowers have to submit the following documents:

• PAN Card
• Office address proof
• Existence of business proof
• Address proof
• Identity proof
• Profit and loss account
• Balance sheet
• Photograph
• Income proof
• Bank statements for the last six months
• Demat account statement
• Cancelled cheque

Salaried borrowers have to submit the following documents:

• PAN Card
• Income proof
• Address proof
• Identity proof
• Demat account statement
• Photograph
• Cancelled cheque
• Bank statements for the last 6 months

Things to Consider Before Seeking a Loan Against Bonds:

Looking to apply for a loan against bonds? Consider the following first:

• The Interest Rate and the Sanctioned Loan Amount: Choose a lender who gives you the most favorable terms and conditions when it comes to the loan amount and the interest rate. Borrow money from the financial institution that sanctions a high amount of loan against a relatively low rate of interest.
• The Repayment Tenure: Avail loan from a lender who offers a flexible tenure to repay the loan. Typically, loan repayment tenure ranges between 1 to 3 years. It also depends upon the amount of money sanctioned as a loan.

How to Apply for a Loan Against Bonds?

There are two ways borrowers can apply for a loan against bonds:

1. Online
   If you are looking to apply for a loan against bonds from SMFG India Credit, simply click on the “Apply Now” button to begin your journey. The application process is relatively hassle-free and fast. 
   Fill the loan application form with your details and upload the requisite documents. A representative will get in touch with you to take the process ahead. 
2. Offline
   Visit your nearest SMFG India Credit branch. Our representatives will be happy to guide you. 
   Are you looking for a loan against bonds? Apply today for a loan against securities to fulfil your needs.

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