Sometimes, financial emergencies crop up, but withdrawing from long-term investments might not be the best move. In such cases, pledging your existing investments for a Loan Against Investments can be a smart alternative. While these loans often come with lower interest rates compared to personal loans, they also carry risks that every borrower must consider.

🔐 What Assets Can Be Pledged for Loans?

These investment instruments are commonly accepted as collateral:

• Fixed Deposits (FD)
• Gold
• Stocks/Shares
• Life Insurance Policies
• Public Provident Fund (PPF)
• Debt Mutual Funds

📊 Loan-to-Value Ratio (LTV): What You’ll Actually Receive

Depending on the type of asset, you’ll only get a portion of its total value as a loan:

This ratio determines how much financing you’ll be eligible for based on the market value of your investment.

✅ Key Benefits of Investment-Backed Loans

• Lower Interest Rates: More affordable than personal loans
• Quick Processing: Easier approvals due to secured collateral
• Preserves Long-Term Investments: You don’t need to break your deposits or sell your shares

⚠️ Risks to Watch Out For

• Market Value Fluctuations: A dip in asset value could force partial liquidation or margin calls
• No Tax Benefits: Unlike home loans, these loans do not qualify for tax deductions
• Misuse for Short-Term Needs: Avoid using significant long-term assets for small, short-term expenses

💡 Smart Advice

• Prefer taking loans against FD or gold for minimal risk
• Be cautious when pledging volatile assets like stocks
• Consider alternatives such as personal loans or credit lines if your need is short-term
• Always consult a financial advisor before making collateral-based loan decisions