I am 45 years old and reside in Bengaluru. I have invested a lot of money in stocks for the last 10 years and my portfolio is INR 25 Lakhs. I now want to start a business with my wife as a partner. We have no dependents. I need INR 10 Lakhs for this business. Should I sell my stocks and start the business or avail a personal loan? I badly want to start this business. Please advice?
There is no need for you to sell your stocks to collect money for the business. You can get 50% of the value of the stocks as a loan against stocks from a bank or an NBFC. Banks have a list of stocks (approved stocks), against which they are willing to lend. Banks open a current account in your name with an overdraft facility. You can withdraw money from this account, whenever you want and repay the amounts by depositing money back into the current account.Banks set a borrowing limit (an amount you can borrow from this account), depending on the value of the stocks. Banks give you a loan of INR 1 Lakh to INR 30 Lakhs against stocks, with loan tenure of 1 to 5 years. If your portfolio of INR 25 Lakhs has stocks approved by banks, you can avail a loan against stocks. This loan is secured against stocks and charges a much lower interest than a personal loan. You don’t need to sell stocks. Just pledge them for a loan. You continue to get dividends and other benefits of the stocks.