What is Loan Against Mutual Funds? Everything You Need to Know

Have you ever faced a sudden financial need but did not want to redeem your mutual fund investments? Many investors hesitate to sell their funds because it disrupts long-term wealth building and may result in financial loss due to market conditions. This is exactly where a loan against mutual funds can be a smart solution. A loan against mutual funds allows you to access money without selling your investments. You continue to remain invested and benefit from market growth while using your funds as security to borrow. 

Unlock instant liquidity without selling your investments. Apply for a loan against mutual funds 

A loan against mutual funds is a secured loan where your mutual fund units are pledged as collateral to get funds. You do not have to redeem your investments. Instead, the lender marks a lien on your units and offers a loan amount based on their value. Once the loan is repaid, the lien is removed, and you regain full control over your units. This type of borrowing is ideal for immediate needs like medical emergencies, business requirements, higher education, or debt consolidation. 

The process of taking a loan against mutual funds is simple and involves pledging units digitally. Here is how it works: 

• You choose mutual fund units that will be lien-marked. 
• The lender marks a lien on those units in your mutual fund account. 
• Based on the market value, an approved loan amount is fixed. 
• Money is disbursed to your bank account, usually within hours. 
• You continue to earn returns on your investments during the loan tenure. 
• After repayment, the lien is removed, and units are released. 

Get instant approval and competitive interest rates by pledging mutual fund units securely online. Get a loan against mutual funds 

Taking a loan against mutual funds offers multiple advantages over selling or opting for unsecured loans. Key benefits include: 

• No need to redeem investments: Continue long-term wealth creation without interruption. 
• Quick processing: Approval and disbursal can be done digitally in a few hours. 
• Lower interest rates: Secured loans usually offer better rates compared to personal loans. 
• Flexible repayment options: Borrowers can pay interest-only EMIs or repay as per their convenience. 
• Continued returns: Investments remain active, and you keep earning market-linked returns. 
• No impact on credit score for investment value changes: Market volatility does not harm credit history. 
• Ideal for emergencies: Provides fast liquidity in urgent financial needs. 

There are two major categories of loans based on mutual fund investment type: 

Pledge equity or debt mutual fund units and access funds instantly with simple eligibility. Apply now 

A loan against mutual funds is available to a wide set of investors who meet basic requirements. You can apply if you are: 

• An Indian resident above 21 years of age. 
• A salaried employee, self-employed individual, or business owner. 
• A mutual fund investor holding units in their name. 
• Someone with an eligible mutual fund portfolio. 
• An investor maintaining funds in registered asset management companies. 

Applying for a loan against mutual funds is straightforward and mainly online-driven. The steps include: 

• Visit the lender’s online portal to initiate the loan request. 
• Enter your PAN and mobile number linked with your mutual fund account. 
• Select mutual fund schemes to pledge as collateral. 
• Approve the lien digitally by approving the request raised with your AMC or registrar. 
• Receive the approved loan amount directly in your bank account. 
• Repay as per the agreed terms and get your lien released after closure. 

Charges may vary among lenders, but here are typical cost components: 

• Interest rate: Usually lower than unsecured personal loans due to collateral. 
• Processing charges: May be a small percentage of the loan amount or a fixed fee. 
• Renewal charges: Applicable for renewing the facility annually in some cases. 
• Penal charges: Charged for delayed repayments. 
• Prepayment charges: Many lenders allow prepayment without fees, but it varies. 
• Other charges: Can include transaction fees or legal verification fees if applicable. 

Although this type of loan is convenient, there are certain risks and important aspects to consider: 

• Market volatility impact: A drop in fund value can trigger a margin call, requiring additional collateral or partial repayment. 
• Lien restriction: You cannot redeem your pledged units until full repayment. 
• Interest burden: Borrowing without need may create unnecessary liability. 
• Additional charges: Check all fees before availing the loan. 
• Repayment discipline: Delay in EMI payments can attract penalties. 

A loan against mutual funds offers a convenient way to unlock the value of your investments without selling them. It gives you access to quick liquidity, competitive interest rates, and continued investment growth. Whether you are dealing with urgent expenses or planning big goals, pledging mutual funds can be a practical and cost-efficient solution. 

Use your mutual fund portfolio smartly to get fast funds without redemption. Get a loan against mutual funds