Understanding Loans Against SIP

Find out how you can borrow funds against your savings plans with a loan against SIP
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3 mins read
11-July-2025

Need funds but do not want to disturb your investment flow? A loan against SIP (Systematic Investment Plan) could be your smartest move. Instead of liquidating your growing mutual fund investments, you can get immediate liquidity by pledging them as collateral keeping your long-term financial plans on track while handling urgent expenses.

Access funds without breaking your investment cycle. Pledge your mutual fund and get liquidity when you need it most. Apply now

What is a Systematic Investment Plan (SIP)?

Think of a SIP as your financial gym, where discipline pays off. A Systematic Investment Plan allows you to invest a fixed amount regularly in mutual funds or stocks. Over time, this habit helps you build significant wealth using the power of compounding and rupee cost averaging. It’s simple, flexible, and designed for long-term growth.

What is a loan against SIP and how does It work?

Imagine needing funds urgently but your mutual funds are performing well, and you don’t want to redeem them. That’s where a loan against SIP helps. You can pledge your SIP units as collateral, and the lender will offer a loan based on their market value usually up to 90% of the value. Your SIP continues to grow while you meet your immediate cash needs.

The loan amount you can avail against your SIP investments is determined by the following factors:

  • Net Asset Value (NAV) of the Mutual Funds: The current market value of your mutual fund units is crucial.   
  • Loan-to-Value (LTV) ratio: Lenders typically offer loans against a certain percentage of the total value of your SIP investments. This percentage, known as the LTV ratio, varies between 80% to 90%, depending on the type of mutual fund and the lender's policies.
  • Type of Mutual Fund: Different types of mutual funds have different LTV ratios. For instance, equity mutual funds may have a lower LTV ratio compared to debt mutual funds.   

For example, if your SIP corpus is worth Rs. 10 lakh, and the lender offers a 90% Loan-to-Value (LTV) ratio, you can avail up to Rs. 9 lakh as a loan.

Keep your investments intact, and still get the funds you need borrow against your mutual fund without a second thought. Apply now

It's important to note that the final loan amount may also be influenced by factors like your credit score, income stability, and the lender's specific policies.

Loan Against Insurance Policy
Loan Against Shares

Factors influencing loan against SIP

Several key variables shape how much you can borrow and under what terms. These include:

  • Net Asset Value (NAV): The higher the NAV of your SIP units, the more you can borrow.

  • Loan-to-Value (LTV) ratio: Typically ranges between 80% and 90%.

  • Type of mutual fund: Debt funds may offer a higher LTV than equity funds.

  • Lender policy: Each lender sets its own limits and terms.

Benefits of taking a loan against SIP

Why liquidate when you can leverage? If you have been building a disciplined SIP portfolio, there’s no reason to break it for short-term needs. A loan against mutual funds helps you get the value of your investments while they continue to grow in the background.

Here’s why this option deserves serious consideration:

  • Instant liquidity: Need money for a time-sensitive goal or emergency? Get quick access to funds without redeeming your mutual fund units.

  • Growth continuity: Your SIP investment continues uninterrupted, helping you stay on track with your long-term goals.

  • Lower interest rates: Since the loan is backed by collateral (your mutual funds), you usually enjoy better rates than unsecured loans.

  • Flexible repayment: Choose repayment schedules that align with your income cycle monthly, quarterly, or custom EMIs.

Take a loan that works with your investments, not against them. Let your investments power your present and your future at the same time. Apply now

Risks associated with loan against SIP

No financial product is entirely risk-free, and loans against SIPs or mutual fund investments are no exception. While the benefits are clear, understanding the downside is equally important to make a confident, informed choice.

Here’s what you should keep in mind:

  • Market fluctuations: Mutual fund investments are market-linked. If the NAV drops sharply, the collateral value reduces and you may need to top it up.

  • Defaulting consequences: Missing repayments could prompt the lender to liquidate your pledged mutual funds units to recover dues.

  • Interest accumulation: Delays in payment can lead to compounding interest, increasing your total repayment burden.

  • Loan limits: You can only borrow a portion of your mutual funds value usually up to 90%. This may not be sufficient for very high-ticket needs.

Interest rates and repayment terms

One of the biggest advantages of taking a loan against mutual funds is the lower interest rate, thanks to the secured nature of the loan. But how much you’ll pay depends on a few key variables.

Here’s what determines your rate and repayment flexibility:

 

  • Credit profile: A higher credit score often leads to more competitive interest rates. But in case of loan against mutual funds, interest rates are impacted by the type and value of your investments.
  • Fund type: Debt mutual funds usually fetch better LTV ratios and lower rates compared to equity mutual funds.
  • Lender policies: Each financial institution has its own structure for setting rates and repayment tenures.

 

Know more about interest rates and processing fees for loan against SIPs.

 

When it comes to repayment, you get control:

  • Tenure: Most lenders offer loan terms ranging from 7 days to 36 months.

  • Flexible EMIs: Choose a repayment plan that aligns with your income cycle.

  • Zero foreclosure charges: Many lenders allow early repayment without penalties.

Step-by-Step guide to applying for a Loan Against SIP

Getting started with a loan against mutual funds is quicker and simpler than most people expect. You can apply digitally and receive funds without disrupting your investments.

Here’s how it works:

  1. Check eligibility: Make sure your mutual fund schemes and the AMC are accepted by the lender for pledging. Check the eligibility and documents required before applying for a loan.

  2. Choose a lender: Compare interest rates, LTV ratios, and processing times before deciding.

  3. Submit application: Provide your PAN, Aadhaar, mutual fund statement, and any required income proof.

  4. Valuation process: The lender assesses your mutual fund units and decides the eligible loan amount based on LTV ratio.

  5. Approval & disbursement: Once verified, funds are disbursed often within 24–48 hours for digital applications.

Quick and seamless, get started and access funds without selling your mutual funds. Apply now

Comparison with other loan options

Loan against SIP vs. personal loan

Feature Loan against SIP Personal loan
Collateral required Yes, SIP units No
Interest rates Lower Higher
Loan amount Up to a percentage of SIP value Based on income/credit
Impact on credit score Minimal Yes
Repayment flexibility High Moderate

 

Loan against SIP vs. Loan against shares

Feature Loan against SIP Loan against shares
Collateral required Yes, SIP units Yes, shares
Loan amount Up to a percentage of SIP value Up to a percentage of share value

 

Conclusion

A loan against SIP is more than a stopgap, it’s a smart financial strategy. Whether you’re facing an urgent cash crunch or want to avoid interrupting your wealth-building journey, this option lets you borrow while your investments keep growing. Just ensure you understand the terms, monitor market movements, and stay disciplined with repayments.

Read more about how loan against mutual funds works in detail.

Need instant funds but want your investments to stay intact? A loan against mutual fund might be the right financial bridge connect your present needs with your future goals. Apply now

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Frequently asked questions

Can we take a loan from SIP?
Yes, you can take a loan against your SIP investments. By pledging your SIP units as collateral, you can borrow funds without liquidating your investments, ensuring that your long-term financial goals remain intact while accessing necessary liquidity.
Is it possible to get a loan on mutual funds?

Yes, it is possible to get a loan on mutual funds. Financial institutions allow you to pledge your mutual fund units as collateral to secure a loan. The loan amount is typically a percentage of the mutual fund’s market value.

What is the SIP loan process?
The SIP loan process involves selecting a lender, submitting an application, and providing necessary documents. The lender evaluates the SIP units to determine the loan amount based on a percentage of their value. Upon approval, the loan is disbursed to your account.
What is the processing fee for a loan against a mutual fund?
The processing fee for a loan against a mutual fund varies by lender but typically ranges from 0.5% to 1% of the loan amount. It’s advisable to check with individual financial institutions for their specific fee structure and any additional charges.
Can I lose my invested money in SIP?

Yes, you can lose money in SIPs. While SIPs are a great way to invest regularly and benefit from rupee-cost averaging, they are not entirely risk-free. If the underlying mutual fund's performance is poor or the market experiences a downturn, your investments may lose value.   

However, by investing in well-diversified funds and maintaining a long-term investment horizon, you can significantly reduce the risk of substantial losses.

It's crucial to choose funds managed by experienced fund managers and conduct thorough research before investing. 

How much loan can I get against my SIP?

The loan amount depends on the current value of your mutual fund units and the lender’s loan-to-value ratio. Generally, a percentage of your investment’s worth is offered as the loan.

What happens if I fail to repay the loan against my SIP?

If you fail to repay, the lender can redeem your pledged mutual fund units to recover the outstanding amount. This may also impact your credit score and future loan eligibility.

Which banks or NBFCs offer loans against SIP?

Several leading banks and NBFCs like Bajaj Finserv offer loans against mutual fund SIPs, subject to eligibility. Availability depends on whether the mutual fund house is empanelled with the lender.

Do I need to stop my SIP to get a loan against it?

No, you don’t need to stop your SIP. Your regular investments can continue even while your mutual fund units are pledged as collateral for the loan.

Will I continue earning returns on my SIP during the loan period?

Yes, you will continue earning market-linked returns on your mutual fund units during the loan period, as the investments remain active and only temporarily pledged to the lender.

Is a credit score required for a loan against SIP?

No, a credit score is not mandatory. Lenders primarily require proof of your mutual fund holdings, as the loan is backed by these investments and not your credit history.

Is a loan against SIP a secured or unsecured loan?

A loan against SIP is a secured loan, as it is backed by your mutual fund units which are pledged to the lender as collateral for the loan.

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