loan against mutual funds

Facts That you Should Know About Loan Against Mutual Funds

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?

Everything That You Need To Know About Loan Against Mutual Funds

A financial crunch necessitates fundraising. 

Out of many funding tools available, a loan against mutual funds is an attractive option.  

What is a loan against Mutual Funds?

Loan against mutual funds is a secured type of loan where you pledge your mutual fund units as collateral as it is a secured loan. It comes with a lower interest rate as compared to other non-secured loans.  

Eligibility

  • You are an Indian national
  • 21 years or more in age
  • can produce age, residential and income proof
  • Income tax return statements

How to apply for this loan?

You can select from an online or offline mode of application. Your mutual fund units will stay with the lender as security until you repay the whole loan amount. You need to sign a lien document, which gives rights to the lender to sell off your units if you fail to repay the loan. The loan amount will depend on the market value of the mutual fund units. 

Salient features of loan against Mutual funds

Various functions make this loan an ideal choice in an emergency.

 They are:

  • Online application, quick approval and fast disbursement of loan funds
  • You can get 50% – 60% of the market value of the mutual fund as the loan amount
  • As it is a secured loan, the interest rate is lower
  • No penalty for foreclosure of the loan

Loan against mutual funds is an ideal funding tool in emergency financial need. It is easy to avail and swift in disbursement.

Must Read: What is a Loan against Mutual Funds and How to Avail it?

Additional Read: 2021 May Months Automobile Top Links

Everything That You Need To Know About Loan Against Mutual Funds

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A financial crunch necessitates fundraising. 

Out of many funding tools available, a loan against mutual funds is an attractive option.  

What is a loan against Mutual Funds?

Loan against mutual funds is a secured type of loan where you pledge your mutual fund units as collateral as it is a secured loan. It comes with a lower interest rate as compared to other non-secured loans.  

Eligibility 

  • You are an Indian national
  • 21 years or more in age
  • can produce age, residential and income proof
  • Income tax return statements

How to apply for this loan?

You can select from an online or offline mode of application. Your mutual fund units will stay with the lender as security until you repay the whole loan amount. You need to sign a lien document, which gives rights to the lender to sell off your units if you fail to repay the loan. The loan amount will depend on the market value of the mutual fund units. 

 Salient features of loan against Mutual funds

   Various functions make this loan an ideal choice in an emergency.

 They are:

  • Online application, quick approval and fast disbursement of loan funds
  • You can get 50% – 60% of the market value of the mutual fund as the loan amount
  • As it is a secured loan, the interest rate is lower
  • No penalty for foreclosure of the loan

 Loan against mutual funds is an ideal funding tool in emergency financial need. It is easy to avail and swift in disbursement.

Additional Read: How to take a loan against mutual fund investments?

Planning To Apply For Loan Against Mutual Funds? Consider These Factors


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You can avail loan against your mutual funds from banks as well as NBFCs. This loan is in the form of an overdraft facility and charges interest only on the amount you use as credit.

Now a days, loan against mutual funds is a versatile option for borrowers. It provides security as well as expensive in comparison to other types of loans available in the market.

Consider the following factors while you apply for a loan against mutual funds:

  • All mutual fund units are not eligible for a credit. A list of approved mutual funds is available with every lender.

  • Your loan request will get a consideration only after you write a lieu of your units in the name of the lender.

  • You may get funds up to 50-60% of the value of the equity type mutual fund units and up to 75-80% in case of debt type mutual fund units.

  • Almost all banks and some NBFCs having assets more than Rs. 100 crores offer loan against mutual funds.

  • You cannot redeem your MF units during the loan tenure but may continue to receive dividends.

  • If you default in repaying the loan, the lender can invoke the lien and instruct mutual fund Company to redeem your units for loan repayment.

It would help if you adequately consider these critical factors before deciding to go for a loan against mutual funds.    

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