Unpredictable ups and downs are a part of human life. There can be varied reasons for liquidity crunch in one’s life, and the only way to solve these situations is through an arrangement of immediate funds.

A loan on mutual funds (LAMF) is one such solution for investors in need of short-term funds. Mutual funds are like any other financial assets undertaken for longer tenures to gain full-fledged returns later. An overdraft or loan on mutual funds is provided by assuring mutual fund holdings as collateral.

Loan against MF units is better than opting for personal or credit card loans with high-interest rates. The loan against mutual funds interest rate can be low with a good credit score, and Fullerton India offers competitive loans against mutual funds interest rates.

Features of LAMF:

• As expected, the LAMF can help individuals cater to their short-term funding needs by using their mutual fund holdings as collateral. Selling these units might get them lower profits than what is offered years or decades later.

• LAMF is like an overdraft facility on a mutual funds account, which allows the borrower to withdraw more funds than the account availability. Once the pledging of mutual funds is complete, an overdraft limit is set on the account based on the value of the mutual fund’s units.

• In these types of secured loans, where the collateral is an investment instrument, the time to obtain a loan is the least, with minimal documentation required. The interest is levied only on the amount utilised and there are no pre-payment charges whatsoever.

• Not all institutions provide loans against mutual funds to borrowers. Some institutions might require mutual fund plans of a specified list of asset management companies as collateral. The loan limit for borrowers also differs accordingly.

Also Read: How to Manage Your Month-End Cash Crunch with a Personal Loan?