Loan Against Securities vs Margin Funding: Which is Better for You?

When you need funds but don’t want to liquidate your investments, both Loan Against Securities (LAS) and Margin Trading Facility (MTF) can seem like attractive options. These two financial tools let you leverage your existing investments — but in very different ways.

Understanding how LAS and margin trading work can help you make smarter, safer borrowing decisions. In this guide, we’ll break down the difference between LAS and margin trading, so you can decide which suits your financial goals better.

What Is the Difference Between LAS and Margin Trading?

Let’s explore how LAS and margin trading work, and what really sets them apart.

How does LAS function?

With LAS, you borrow money by pledging your existing financial assets — typically mutual funds or shares. These remain in your name, and you continue to earn any dividends or capital gains.

• You get a sanctioned limit based on the value of your pledged investments.
• The loan can be used for personal or business needs.
• Common Loan-to-Value (LTV) ratios range from 50% to 70% depending on the security type and lender policy (as of 2025).

How does Margin Trading work?

Margin Trading lets you borrow funds from a broker to buy more shares than you could with your own capital.

• You pay a partial amount (margin), while the broker lends the rest.
• You must maintain a minimum margin level.
• If stock prices fall, you may face a margin call, requiring you to deposit more funds or face asset liquidation.
• It's ideal for short-term trading and carries both high gain and high loss potential.

When should you choose one over the other?

Choosing between LAS and margin trading depends on what you're trying to achieve:

• Go for LAS if you're looking to raise funds without disturbing your investments. It's ideal for personal expenses, business growth, or emergencies.
• Choose MTF only if you're actively involved in the stock market and willing to accept high risk in exchange for high reward.
• LAS gives you peace of mind and flexibility, while MTF demands close monitoring and fast decisions.

Example: Suppose Ramesh pledges mutual funds worth ₹5 lakhs and gets an LAS of ₹3.5 lakhs at 10% interest. Meanwhile, Priya uses margin trading to buy additional shares worth ₹3.5 lakhs. A sudden market dip could force Priya to sell at a loss, while Ramesh continues to hold his investments and repay steadily.

What Are the Risks of Margin Funding?

Margin funding might seem attractive when markets are rising, but it comes with serious risks that every investor should understand.

How can market volatility impact you?

If the stock market falls suddenly, your portfolio's value can drop below the required margin. This may trigger a margin call, requiring you to add more funds or the broker may sell your holdings.

Example: Suppose you take margin funding of ₹5 lakhs and stocks fall by 15%. You’re now under pressure to bring in fresh funds or risk forced sell-off at a loss.

What are the costs involved?

• Daily interest on borrowed funds (usually higher than LAS)
• Maintenance margin obligations
• Brokerage and transaction charges

These costs add up quickly if your trades don’t perform.

How does LAS mitigate these risks?

LAS doesn’t involve speculation. It’s a way to raise funds using your investments without buying or selling them.

• Flexible repayment with no daily margin requirements
• Lower interest rates and longer tenures
• No forced selling unless there’s a repayment default

Which Option Is Safer and Smarter for You?

Let’s look at when each option makes sense based on your financial needs and comfort with risk.

What are your investment goals?

Choose LAS if you want to raise money for education, business expansion, or emergencies.

Choose MTF only if you’re an active trader aiming for quick stock market returns.

How do you assess your risk tolerance?

If you prefer stability and minimal risk, LAS is a better fit.

If you’re comfortable with volatility and quick decisions, margin trading might work.

What about regulatory oversight?

Both LAS and MTF are under SEBI regulations, but:

• MTF has stricter compliance due to high leverage.
• LAS involves fewer complexities and is borrower-friendly.

Conclusion

When comparing the difference between LAS and margin trading, it's clear they serve very different purposes.

If you value stability, ownership of your assets, and a low-risk way to unlock funds, Loan Against Securities is the smarter option. If you're an experienced investor with a high risk appetite, margin trading could be rewarding — but it demands active tracking and readiness for volatility.

Explore more smart lending options and financial guides at Quicklend Learning Center.

This is general guidance. For personalized loan advice, contact our advisors.