₹25,000.00 - ₹25 Cr
Loan of up to 80% of policy value| Funding against policies under lock-in period
Overview
-
What are charges in mutual funds and ULIPs?
In summary
Mutual funds and ULIPs both offer investment exposure, but their cost structures are different.
- Mutual funds mainly involve Total Expense Ratio and applicable exit loads.
- Mutual funds do not charge an entry load under current SEBI rules.
- ULIPs can include premium allocation, fund management, administration, mortality, and other policy-related charges.
- ULIP fund management charges are subject to regulatory limits and product terms.
- Mutual fund expenses reduce the NAV and therefore affect investor returns.
- ULIPs combine investment and life insurance, which creates additional insurance-related costs.
Comparing only expense ratios may therefore provide an incomplete cost comparison.
Review the complete charge structure, investment objective, liquidity, and protection needs before choosing either product.
What are charges in mutual funds and ULIPs?
Mutual fund charges cover the costs involved in managing and operating an investment scheme. These expenses are generally adjusted from scheme assets rather than collected separately from investors. The Total Expense Ratio includes permitted operating expenses such as management and administrative costs. ULIP charges cover both investment management and insurance-related services. These charges can be deducted from premiums or the policy fund, depending on the charge type. Therefore, a direct comparison requires examining each charge separately.
Types of charges in mutual funds
Mutual funds generally have a simpler and more transparent charge structure.
- Total Expense Ratio: TER represents annual operating expenses as a percentage of daily net assets.
The applicable TER is reflected in the scheme NAV. - Entry load: Mutual fund schemes cannot charge entry load under current regulations.
- Exit load: Certain schemes may charge an exit load when units are redeemed within a specified period.
Transaction charges: A distributor may levy permitted transaction charges when applicable conditions are satisfied.
The exact expenses and exit load depend on the scheme selected. Investors should review the scheme documents and current disclosures before investing.
Choose mutual funds with low expense ratios and minimal exit loads to keep more of your investment compounding for long-term growth. Apply for a loan against mutual funds now
ULIP charges
How to Secure a Rs. 2 Crore Loan Against Securities Instantly
ULIPs have a broader charge structure because they combine investment with life insurance protection. The applicable charges depend on the specific product and its policy terms. These may include premium allocation charges, fund management charges, policy administration charges, and mortality charges. Some policies may also specify switching, partial withdrawal, or discontinuance-related charges. IRDAI requires insurers to disclose applicable charges under the relevant product framework. Therefore, investors should review the policy schedule before comparing different ULIPs.
Types of charges in ULIPs
ULIP charges can affect the amount allocated towards investment and the policy fund value.
- Premium allocation charge: This may be deducted from the premium before units are allocated.
- Fund management charge: This covers the management of investments and is reflected through the unit value.
- Mortality charge: This relates to the cost of providing life insurance protection.
- Policy administration charge: This covers specified costs associated with administering the policy.
- Switching charge: This may apply when funds are switched beyond the free switching facility.
Discontinuance charge: Applicable charges may arise when a policy is discontinued, subject to policy terms.
IRDAI prescribes the applicable framework for ULIP charges and reduction in yield.
Mutual funds vs. ULIPs – charges breakdown
How to apply for Bajaj Finance loan against shares
| Charge | Mutual funds | ULIPs |
| Expense or fund management cost | Included through TER | Fund management charge applies |
| Entry load | Not permitted | Premium allocation charges may apply |
| Exit or discontinuance cost | Exit load may apply | Discontinuance charges may apply |
| Mortality charge | Not applicable | Applicable for life insurance protection |
| Policy administration charge | Not applicable | May apply according to policy terms |
| Switching charge | Scheme-specific switching provisions may apply | May apply according to policy terms |
| Insurance component | Not included | Included |
| Investment lock-in | Generally no lock-in, except specified schemes | Individual ULIPs have a minimum five-year policy term |
Individual ULIPs have a minimum five-year policy term under current IRDAI requirements. Mutual fund costs should be checked through scheme-level disclosures, including current TER and exit load information.
To learn more, visit ULIP vs Mutual Fund.
Need funds without redeeming your investments? Learn about loan against securities to retain your holdings while meeting urgent needs. Explore now
Impact of charges on investment returns
Charges reduce the amount available for investment or the value ultimately received by the investor. For mutual funds, the TER is deducted through the scheme's NAV calculation. A higher TER can therefore reduce the returns retained by investors, all else being equal. For ULIPs, multiple charges can affect the policy fund value over the investment period. Mortality charges also reflect the cost of life insurance protection. Therefore, investors should compare net outcomes rather than focusing on one charge alone.
Tax benefits and costs in mutual funds and ULIPs
Features & Benefits for Bajaj Finance loan against shares
Tax treatment depends on the product, investment type, holding period, and applicable tax provisions. Investment charges should therefore be considered separately from tax liabilities. Certain life insurance premiums may qualify for Section 80C deductions, subject to applicable conditions. Tax treatment of ULIP maturity proceeds under Section 10(10D) depends on prescribed conditions. Mutual fund gains are generally subject to applicable capital gains taxation when units are transferred or redeemed. The applicable holding period and tax treatment vary according to the fund category and prevailing provisions. Investors should evaluate tax treatment based on their specific investment and applicable tax regime.
Which is more cost-effective: mutual funds or ULIPs?
When comparing charges, mutual funds generally have a simpler cost structure than ULIPs. Mutual funds mainly involve expense ratios and applicable exit loads, while ULIPs may include mortality, fund management, and administration charges. Mutual funds also generally offer greater liquidity, while ULIPs can suit investors seeking investment with life insurance protection.
1. Hidden charges: what to watch out for
Mutual fund costs are disclosed through expense ratios, exit loads, and applicable transaction charges. ULIPs may include administration, mortality, switching, and discontinuance charges. Reviewing the product documents helps you understand the total cost before investing.
2. Regulatory aspects
Mutual funds in India are regulated by the Securities and Exchange Board of India (SEBI), which governs expenses and disclosures. ULIPs are regulated by the Insurance Regulatory and Development Authority of India (IRDAI), which oversees insurance-related charges and disclosures. Both frameworks support transparency and investor protection.
3. Mutual fund vs. ULIP – which one to choose based on charges?
Mutual funds may suit investors prioritising cost efficiency, liquidity, and flexibility. ULIPs may suit those seeking life insurance alongside market-linked investments. Consider your financial goals, investment horizon, liquidity needs, and insurance requirements before choosing between them.
Conclusion
Eligibility criteria for Bajaj Finance loan against shares
Comparing mutual fund and ULIP charges helps you understand how product costs can influence your investment outcome. Mutual funds generally have simpler investment-related charges, while ULIPs include additional insurance-related costs. A mutual fund primarily focuses on investment management and market participation. A ULIP combines investment exposure with life insurance and therefore has a broader charge structure.
Review TER, exit loads, policy charges, mortality costs, tax treatment, and liquidity before making a decision. A complete cost assessment can help you select a product aligned with your financial goals.
If you need liquidity without immediately redeeming eligible investments, a loan against mutual funds can provide another financing option. The facility allows eligible mutual fund units to be pledged instead of being sold for temporary funding requirements.
Facing an unexpected expense but do not want to redeem your investments? A loan against mutual funds or ULIPs can give you quick cash while your money continues to grow. Explore loan against securities here
Loan against your assets
Loans Against Securities
Related Articles
Frequently asked questions
General
Which is better for tax-saving: Mutual funds or ULIPs?
Both mutual funds (through ELSS) and ULIPs offer tax-saving benefits under Section 80C. ELSS offers higher liquidity with a shorter lock-in period of three years, whereas ULIPs combine insurance with investment but have a longer lock-in period of five years.
Do ULIP charges reduce over the policy term?
Yes, ULIP charges like premium allocation and policy administration charges often reduce over time, especially after the initial years. This structure helps increase the fund value as your investment matures.
Which has lower charges, mutual funds or ULIPs?
Mutual fund vs ULIP charges are generally lower for pure investment goals, with expense ratios around 0.5%–2.5%, compared with ULIP charges often exceeding 2%–4% initially. Explore loan against mutual funds charges with Bajaj Finance for liquidity.
Can I get a loan against mutual funds without selling my units?
Yes, mutual fund units can be pledged as collateral without redemption. Loan against mutual funds charges apply separately from fund expenses. Bajaj Finance offers loan against securities options for accessing funds without selling eligible investments.
What are the hidden charges in ULIPs and mutual funds?
ULIPs may have fund management, mortality, policy administration, and switching charges. Mutual funds may include expense ratio, exit load, and transaction charges. These are disclosed in the policy or scheme documents, so not truly “hidden,” but often overlooked.
Are mutual fund charges regulated by SEBI?
Yes, SEBI regulates all mutual fund charges. It sets limits on expense ratios and mandates transparent disclosure of all costs, ensuring investor protection and fair practices across fund houses.
Can I switch funds in a ULIP without charges?
Most ULIPs offer a limited number of free switches between fund options each year. Beyond that limit, nominal charges may apply, depending on the insurer’s policy.
What charges are unique to ULIPs?
ULIPs come with charges not found in mutual funds, such as premium allocation charges, policy administration charges, mortality charges, and fund switching charges. These are deducted from your premium or fund value, making them unique compared to mutual funds, which usually only involve an expense ratio.
How does the expense ratio affect mutual fund returns?
The expense ratio represents the annual fee charged by a mutual fund to manage investments. A higher expense ratio reduces your overall returns since it is deducted from the fund’s assets. Conversely, a lower ratio allows you to retain more of your earnings, improving long-term compounding.
Can I avoid ULIP allocation charges?
ULIP allocation charges are usually mandatory and deducted upfront from your premium. However, you can minimise their impact by choosing plans with lower charges, comparing insurers before investing, or opting for online ULIPs, which often have reduced allocation and administrative fees compared to traditional plans.
Disclaimer
1. Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company(BAJAJ FINANCE) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page.
2. All other information, such as, the images, facts, statistics etc. (“information”) that are in addition to the details mentioned in the BFL’s product/ service document and which are being displayed on this page only depicts the summary of the information sourced from the public domain. The said information is neither owned by BFL nor it is to the exclusive knowledge of BFL. There may be inadvertent inaccuracies or typographical errors or delays in updating the said information. Hence, users are advised to independently exercise diligence by verifying complete information, including by consulting experts, if any. Users shall be the sole owner of the decision taken, if any, about suitability of the same.