How does a loan against mutual funds work?

The following stages explain how a loan against mutual funds converts eligible holdings into an accessible credit limit:

If the portfolio value increases, the drawing power may rise, subject to reassessment and the sanctioned limit. Conversely, a material NAV decline can reduce collateral coverage and trigger a margin shortfall.

A loan against mutual funds can provide several practical advantages when used for a temporary and clearly defined financial requirement:

• No compulsory redemption: You can access liquidity while retaining ownership of your eligible investments.
• Continued market participation: Pledged units remain invested and may appreciate or decline according to market performance.
• Interest on utilisation: Interest is generally calculated only on the withdrawn amount, reducing charges on unused drawing power.
• Digital access: Application, verification, lien authorisation, disbursal, and account management can usually be completed online.
• Flexible tenure: Repayment periods ranging from seven days to 36 months support different short-term borrowing requirements.

• Additional drawing power: Portfolio appreciation may provide extra credit against existing lien-marked units, subject to applicable terms.

  
  

These advantages should be weighed against interest costs, market volatility, processing fees, and the possibility of pledged-unit liquidation after default.

Why redeem when you can borrow? Apply now for a loan against mutual funds and stay invested for future growth.

Applicants must satisfy the lender’s eligibility requirements and hold eligible schemes with sufficient collateral value.

Actual approval depends on portfolio composition, fund eligibility, unit ownership, existing obligations, and the lender’s current credit policies.

You may be eligible for a loan against securities. Click to apply

The sanctioned amount can generally support legitimate personal or professional expenses without requiring redemption of your long-term investments.

• Medical requirements: Pay hospitalisation, treatment, diagnostic, or emergency healthcare expenses.
• Education costs: Cover tuition fees, professional courses, accommodation, or other academic requirements.
• Business expenditure: Address working-capital shortages, supplier payments, inventory purchases, or temporary operational expenses.
• Home improvements: Finance essential repairs, renovations, fixtures, or maintenance work.
• Wedding expenses: Manage venue, catering, travel, and other planned costs within a defined budget.
• Debt consolidation: Repay costlier obligations after comparing total interest, charges, and repayment terms.

• Large purchases: Fund necessary appliances, furniture, or a vehicle down payment without immediately selling investments.

  
  

Borrowing should match a short-term requirement supported by a realistic and clearly identified repayment source.

Read more - loan against mutual funds for higher education

Only a limited set of documents is generally required for verification and loan processing:

• PAN card
• Aadhaar card, passport, or voter ID for KYC verification

• Consolidated Account Statement showing eligible mutual fund holdings

  
  

Additional records may be requested when ownership, KYC information, bank details, or portfolio information requires further verification.

Applying for a loan against mutual funds is easier than ever:

Steps to apply

1. Visit the lender’s official loan against mutual funds page and select the application option.
2. Enter your registered mobile number and authenticate your identity using the received OTP.
3. Provide your PAN, date of birth, email address, and other requested KYC information.
4. Review the eligible mutual fund schemes retrieved from your available investment portfolio.
5. Select the schemes and units that you want to offer as collateral.
6. Check the proposed limit calculated using current NAV, applicable LTV, and scheme eligibility.
7. Digitally authorise lien marking and accept the relevant loan terms after reviewing them carefully.

8. Complete bank verification and submit the application for approval and disbursal.

   
   

Funds may be disbursed within 24 to 48 working hours after successful verification and pledge confirmation, depending on operational requirements.

Current interest rates for loan against mutual funds should be checked before accepting the facility.

Floating-rate loans taken by individuals or Micro and Small Enterprises may not attract foreclosure or part-prepayment charges under applicable conditions.

A loan is borrowed money rather than an investment, so applicants should assess the following considerations before proceeding:

• Confirm that the borrowing requirement is temporary and supported by a reliable repayment plan.
• Check the applicable LTV because equity, debt, and hybrid schemes may receive different valuations.
• Compare interest rates, processing fees, prepayment charges, penal charges, and other contractual costs.
• Maintain sufficient collateral coverage to manage ordinary NAV fluctuations without creating an immediate shortfall.
• Monitor drawing power, utilised balance, interest accrual, payment dates, and margin-related alerts throughout the tenure.
• Avoid pledging units required for near-term investment goals because lien-marked units cannot be redeemed or transferred.
• Read the loan agreement carefully to understand repayment obligations, default consequences, and the lender’s liquidation rights.

A loan against mutual funds provides liquidity by allowing eligible units to secure a credit limit without immediate redemption. Your investments remain market-linked, while interest generally applies only to the amount withdrawn from the available limit. Before borrowing, confirm scheme eligibility, LTV, costs, repayment terms, and margin-call consequences. A disciplined repayment plan and regular portfolio monitoring can help you use this facility without unnecessarily affecting your longer-term investment objectives.

Why redeem when you can borrow and stay invested?

Do not let emergencies derail your investments. Apply now for a loan against mutual funds and enjoy liquidity without compromise.