Loan against mutual funds is also known as a loan against securities. Financial institutions in India offer you the option of monetising your investments. You do not need to sell your shares, bonds and mutual funds to get access to funds.

Uses of the loan

The only restriction on the use of the loan is that it should be used for legitimate needs. So, you can use the loan to pay for starting a business, medical needs, tuition fees, or shopping.

Advantages of the loan

The processing is quick with minimal documents and no prepayment charges.

Features of the loan

Here are the defining features of the loan

• Opt for overdraft and line of credit facility
• Get loan amounts starting from Rs 5 lakhs and going up to Rs 5 crores
• Affordable loan against mutual funds interest rates
• If you use the line of credit facility, you pay interest only on the amount used  
• Loan tenures usually start with one year and can be revised late
• LTV offered is usually 50% against a list of approved shares

Documents required for the loan

The list of documents a lending institution will ask you to submit are:

• Loan application form – duly filled and signed
• Passport size photographs
• Identify proof, address proof,
• Documents proving your bank account details
• Proof of your Demat account
• Holding statement of the Demat and Mutual Fund account
• Income proof, based on applicability

The list is indicative and will vary across lenders. Always reach out to the customer care representative of the lender to know the exact details and procedures for a loan against mutual funds.

Additional Read: What Is A Loan Against Mutual Funds And How To Avail It?