Archive · 27 Nov 2025
How Loan Against Stocks Works
A loan against stocks is like a loan where you use your shares as a promise to pay back.
The lender can give you up to half of the value of your shares.
But if the value of your shares goes down, like in a market crash, the lender may ask you to put in more money or sell your shares to cover the loss.
If you don't, the lender can sell your shares to get their money back.
It's a way to get money without selling your shares, but it's risky because you could lose your shares if the market goes down.
Loans against stocks are secured by pledging shares as collateral, typically up to 50% of their value.
In a market crash, the value of pledged shares may decrease, triggering a margin call.
Lenders monitor the mark-to-market value of pledged shares daily and may require additional funds or liquidate the shares if the investor fails to meet the margin call.
Interest rates for loans against stocks vary by lender and are typically higher than traditional loans.
Investors risk losing their pledged shares if they cannot meet the margin call during a market downturn.
- Who
- Investors who pledge shares as collateral for loans
- What
- Loan against stocks is a secured loan where shares are pledged as collateral
- When
- During a market crash, the value of pledged shares may decrease, triggering a margin call
- Where
- Offered by banks, brokers, and other financial institutions
- Why
- To obtain funds without selling shares, but with the risk of losing them in a market downturn
- Loan Amount
- Up to 50% of the value of pledged shares
- Margin Call
- Lenders monitor mark-to-market values daily
- Liquidation
- Lenders can sell pledged shares if the investor fails to meet the margin call
- Interest Rates
- Varies by lender, typically higher than traditional loans
- Risk
- Investor may lose pledged shares in a market crash