Imagine needing urgent funds without wanting to disturb your investments. Instead of redeeming your mutual fund units and losing potential future gains, you can pledge them as collateral to avail a loan. This option, known as a loan against mutual funds, allows you to access liquidity while your investments continue to grow. By pledging your mutual funds, you get instant credit at competitive interest rates, with flexible repayment options. The pledged units remain in your portfolio, and you can still benefit from market-linked returns.
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 amount you can borrow depends on the type of mutual fund you pledge. Lenders usually provide a percentage of the Net Asset Value (NAV) of the pledged units. For equity funds, the loan-to-value ratio (LTV) is generally lower compared to debt funds due to volatility risks.
This ensures your lender’s security while giving you the liquidity you need.
Check your eligibility and know how much loan you can get against mutual funds today.
Understanding loan limits against mutual funds (equity vs debt)
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.
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.
Minimum loan amount, tenure and repayment options
Lenders provide flexibility in both loan size and repayment.
| Feature | Typical range |
|---|---|
| Minimum Loan | Rs. 25,000 – Rs. 1000 crores |
| Tenure | 7 days– 36 months (renewable) |
| Repayment | Interest-only EMI |
Pointers:
- Interest is payable only on the utilised amount.
- Prepayment and foreclosure are usually allowed.
- Tenure extensions are possible with lender approval.
What happens when the fund value drops?
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.
Loan against mutual funds vs selling vs other loans
Here is a side-by-side comparison to understand why pledging can be more advantageous:
| Aspect | Loan against mutual funds | Selling mutual funds | Unsecured loans |
|---|---|---|---|
| Ownership | Retained | Lost | N/A |
| Market gains | Continue | Stopped | N/A |
| Processing | Quick and Paperless | Immediate | Moderate to slow |
| Interest rate | Lower (secured) | N/A | Higher (unsecured) |
| Flexibility | High (partial repayment, renewals) | Not Applicable | Moderate |
This makes pledging a smarter choice when you need liquidity without long-term compromises.
Use cases: Optimal use of mutual fund loans
Pledging mutual funds can be beneficial in several real-life scenarios:
- Business needs: Managing working capital, expansion, or emergency expenses.
- Personal requirements: Funding for education, wedding, or medical emergencies.
- Investment opportunities: Using liquidity to seize time-sensitive deals.
- Avoiding premature redemption: Continue compounding while accessing funds.
