A loan against shares, also referred to as securities-based lending or share pledging, is a loan where borrowers use their shares or securities as collateral to secure financing from a lender. Unlike traditional forms of collateral such as real estate or cash, the borrower's investment portfolio acts as security for the loan.
This type of loan can be highly advantageous for individuals or businesses with a substantial investment portfolio who require capital without having to sell their securities. It enables them to leverage their investments to obtain financing while potentially benefiting from any future appreciation in the value of their portfolio.
It is crucial to understand that the terms and conditions of a loan against shares may vary among lenders. Borrowers must thoroughly comprehend the terms, risks, and costs associated with this type of loan and seek professional advice if necessary before entering into such an agreement.