A Loan Against Mutual Funds (LAMF) is a convenient financing option that enables investors to unlock the value of their mutual fund holdings without redeeming their investments. Instead of selling your mutual fund units and potentially missing out on future market gains, you can pledge them as collateral to a lender and obtain funds to meet personal, business, or emergency financial requirements.
Under this arrangement, the lender places a lien on the pledged mutual fund units, which means the investments remain in your name but cannot be sold or transferred until the loan is repaid. This allows you to continue benefiting from potential capital appreciation and, where applicable, dividend earnings while accessing the liquidity you need.
LAMF is generally considered a cost-effective borrowing solution, as interest rates are often lower than those charged on unsecured loans. The loan approval process is usually quick, with minimal documentation requirements, making it an attractive option for investors seeking immediate funds without disturbing their long-term investment strategy.
Get instant liquidity while your investments stay intact with a loan against mutual funds. Apply now
How much loan can I get against mutual funds?
The loan amount available under a Loan Against Mutual Funds (LAMF) depends on the type of mutual funds pledged as collateral. Lenders generally offer up to 50% of the Net Asset Value (NAV) of equity mutual funds due to their relatively higher market volatility. In contrast, debt mutual funds are considered less volatile and may qualify for a higher loan-to-value ratio, typically ranging between 75% and 85% of their NAV.
Most lenders provide this facility in the form of an overdraft (OD), offering borrowers greater flexibility in accessing funds. Rather than receiving a lump-sum loan amount, you can withdraw money as and when required within the approved limit. Interest is charged only on the amount utilised, not on the entire sanctioned limit, helping reduce borrowing costs.
A key advantage of this arrangement is that your mutual fund investments remain intact and continue to participate in market growth, allowing your wealth to potentially compound over time while meeting short-term liquidity needs.
Check your eligibility and know how much loan you can get against mutual funds today.
Understanding loan limits against mutual funds
Different mutual fund categories attract different loan values. Here is a quick overview:
| Type of Mutual Fund | Loan-to-Value (LTV) Ratio | Explanation |
|---|---|---|
| Equity Mutual Funds | Up to 50% of NAV | Due to market volatility, lenders offer lower LTV to minimise risk. |
| Debt Mutual Funds | Up to 90% of NAV | Debt funds are relatively stable, allowing higher borrowing limits.[HK1] |
Key points to remember:
- Equity fund loans give you moderate liquidity but preserve your growth potential.
- Debt fund loans can unlock larger amounts, suited for urgent high-ticket requirements.
- Your loan value changes with daily NAV fluctuations.
Secure higher limits with a loan against mutual funds without redeeming your investments. Apply now
Max loan amounts offered by leading lenders
Here is an indicative comparison of maximum loan amounts lenders usually provide:
| Lender type | Maximum loan amount |
|---|---|
| Banks | Rs. 5 crores |
| NBFCs | Up to Rs. 1000 crores |
This wide range makes loans against mutual funds suitable for both small and large financial needs.
Eligibility criteria for loan against mutual funds
Eligibility criteria
- Nationality: Indian
- Age: 21 to 90 years (A co-borrower is required if the applicant is over 70)
- Employment: Salaried or self-employed
- Security Value: Minimum of Rs. 50,000
Required documents
- PAN card
KYC documents (any one of the following):
- Passport
- Driving License
- Voter’s Identity Card
- Aadhaar
- Job Card issued by NREGA
- Letter issued by the National Population Register
How to calculate your loan eligibility?
Your loan eligibility depends on:
- Type of fund (equity or debt)
- Number of units pledged
- Current NAV
Applicable LTV ratio
Example: If you pledge debt mutual funds worth Rs. 10 lakh with an LTV of 75%, your eligible loan amount will be:
Rs. 10,00,000 × 75% = Rs. 7,50,000
This simple calculation helps you estimate how much liquidity you can unlock instantly.
What happens if the value of your mutual funds falls after taking a loan?
Since loans are linked to the market value of pledged units, NAV fluctuations affect your collateral value.
Key situations to note:
- If NAV falls, the loan-to-value ratio may breach limits.
- The lender may request additional collateral or partial repayment.
- Continuous market fall could lead to the liquidation of pledged units.
Being mindful of market risks helps you plan better before pledging.
