Loan against securities by Zerodha Capital

Personal finance
1

Hi community members,
I want to know details about Loan against securities by Zerodha Capital.
Suppose I am taking loan of 5 lakh against MF units, what will be effective interest rate?
Like 10.5% + Confiscation charges (Equity mutual fund) 1.5% of the sell value + |Pledging (per security)|₹32|
|Unpledging (per security)|₹32|
|Invocation of pledge|₹20|
.
Does confiscation charges apply agains after 1 year for auto-renewal?
For stocks, per security 32 means per scrip like COALINIDA? and if I want to inc. loan then will it be applicable again?
Does it effect positively CIBIL score if use good?

If anyone has any real experience, i will appreciate if you can share your experience.

Finally, I will appreaciate if Zerodha can share video on youtube with one example from start to end for MF and stocks.
Thanking you in advance.

2

I want to add one more thing.
I think it will be great if they can add calculator for this like Brokerage calculator – Zerodha.
@nithin Sir, can you look into this?

3

Hi,

Here is the list of charges applicable (non-refundable) when availing LAS:

  1. Processing fee per loan ₹436

  2. Confiscation charges (Equity) 0.7% of the sell value ( confiscation charges are only applicable when the securities pledged are confiscated due to LTV reaching higher than 50% or interest unpaid for three consecutive months)

After taking a loan you can renew your loan for an additional year, after which you will have to close the loan, but you will always have the option of availing a fresh loan. Confiscation will only be triggered when you fail to pay the interest or principal amount past the due date of the tenure.

  1. Confiscation charges (Equity mutual fund) 1.5% of the sell value (confiscation charges applicable as mentioned above)

  2. Interest rate (subject to change from time to time) 10.5% per annum (flat annualised)

  3. Penal charges (subject to change from time to time) 18% per annum

Yes, it impacts the credit score positively.

We will work on this feedback of creating a video tutorial :slight_smile:

Also, we do have an interest calculator in place, linked here.

You can visit our FAQ page for any additional concerns if any.

4

Thank you for clarifying.
Can zerodha add details in loan calculator with detail charges similar to that brokerage calculator?

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5

We will check with our technical team if this is feasible.

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6

@kulsum_khan Just curious, so lets say I don’t pay back the principle after exactly 1 year of the tenure, then the securities under pledge would be confiscated to settle the dues.

Now the loan is lets say for 1L, but the value of the securities would be 2L (assuming 50% haircut), then

  • Would Zerodha sell everything to settle the dues?
  • How would Zerodha sell the securities? Would they be sold at the market price at the next trading day?
  • Also, the stocks worth 2L would have some gains, lets say a gain of 50k on the original buy value of 1.5L, then would Zerodha confiscate the stocks and sell them independently or would they sell it on my account and I would need to also settle the Capital Gains and pay taxes on the same?
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7

@Quicko any suggestions on the last point above? Need some expert tax advice.

8

Hi,

To answer your queries,

  1. If the principal amount is not repaid by the end of the tenure, only the securities equivalent to your outstanding balance will be confiscated. The remaining securities will be unpledged and credited back to your demat account.

  2. Yes, the securities are sold at market price the next trading day.

  3. In this scenario, regardless of who sells the stocks, you will be responsible for paying the tax. However, please consult with tax experts for professional advice on this query.

Hope this clarifies. You can check these FAQs for more information.

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9

Hi
Incase of 19 lakhs loan against my securities, monthly EMI is around Rs.18000 for 12 months
.does it include principal amount too or is it sepraye

10

Hi @Dr_Vinayak_Raghunath

LAS requires the client to service just the interest rate applicable on a monthly basis. The concept of EMI is not applicable to LAS.

You can check the below link for FAQs related to LAS

11

Hi @Meher_Smaran , @kulsum_khan

According to the FAQ, the interest rate is described as a flat rate. And after reviewing the calculation, the interest rate is fixed.

In the attached image, taken from the “ADDENDUM to the MASTER LOAN AGREEMENT” document, it states that the interest will be calculated on the outstanding principal.

IMG-20240822-WA0019
IMG-20240822-WA00191080×224 44 KB

Please clarify on this.

12

Hi Ananthu,

Let me clarify what this means: at Zerodha Capital, we charge a fixed annualized interest rate of 11.5% on loans against securities. This interest is calculated only on the outstanding loan amount, and it does not compound, meaning that the interest isn’t added to the principal balance over time.

As a result, if you decide to prepay a portion of your loan, you’ll directly reduce the principal amount, lowering the interest you’ll need to pay in the future.

However, this interest is subject to change based on the market conditions. If you need any further support, you may contact us here.

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