A loan against mutual funds (LAMF) is classified as a secured loan, where your mutual fund units serve as collateral.
Investing in mutual funds can significantly contribute to wealth accumulation over time. Interestingly, these investments can also serve as collateral for securing a loan. Lenders may consider your mutual fund holdings as a guarantee, allowing you to obtain loans at competitive interest rates. Prior to approving the loan, lenders will evaluate the value of your investments.
Numerous banks and financial institutions provide loans against mutual funds, enabling you to access necessary funds without liquidating your investments. This approach is an effective strategy for addressing immediate financial requirements while preserving your long-term investment objectives. Let us explore the concept of a loan against mutual funds and the appropriate circumstances for applying for one.
Wallet4Wealth helps you unlock the value of your mutual funds by offering quick and hassle-free loans against your investments. With competitive interest rates and a seamless process, Wallet4Wealth ensures that you get financial support without disrupting your long-term investment goals.
What Is a Loan Against Mutual Funds?
A loan against mutual funds (LAMF) is classified as a secured loan, where your mutual fund units serve as collateral. The lender disburses funds based on the assessed value of your mutual fund assets. Notably, you can continue to earn returns on your investments even after they have been pledged.
Typically, banks and non-banking financial companies (NBFCs) offer loans against both equity and debt mutual funds. However, the specific terms and loan-to-value (LTV) ratios may differ based on the type of mutual fund involved.
How Does a Loan Against Mutual Funds Work?
A loan secured by mutual funds operates by using your mutual fund units as collateral to obtain financing from a bank or a non-banking financial company (NBFC).
Step-by-Step Process:
- Application Process: Apply for the loan from a lender that provides this option.
- Lien Establishment: After submitting the necessary documents, the lender establishes a lien (a legal claim) on your mutual fund units, restricting you from selling or redeeming them until the loan is fully repaid.
- Loan Amount Determination: The loan granted depends on the type and valuation of the mutual fund units and shares units
- Fund Disbursement: Once approved, the loan amount is directly deposited into your bank account.
- Repayment Options: You can repay through equated monthly installments (EMIs) or a single payment, based on lender conditions.
- Lien Removal: Upon full repayment, the lien is lifted, and you regain complete ownership of your mutual fund assets.
Wallet4Wealth simplifies this process, ensuring that you get quick approvals and flexible repayment options while keeping your investments intact. call us at 9124655104 For loan against mutual fund
Eligibility and Required Documents
Eligibility Criteria
- You should be an Indian resident.
- You must hold mutual funds with a Single Mobile no & Email-id
- You should have a regular source of income to ensure repayment capacity.
- Jointly-held mutual funds can also be pledged if all holders give their consent.
Required Documents
- KYC documents (Photo, PAN card, Aadhaar card/ passport & Bank proof)
Loan Amount and LTV Ratio
The loan amount depends on the type and value of your mutual fund units:
- Equity Mutual Funds – Lenders usually offer up to 50% of the current value.
- Equity Shares – Lenders usually offer up to 50% of the current value.
- Debt Mutual Funds – Lenders may offer up to 70% to 80% of the current value.
Example:
- If your equity mutual fund units are valued at ₹20 lakh, you can get a loan of up to ₹10 lakh.
- If they are debt funds, you could get up to ₹14–16 lakh.
Wallet4Wealth helps you maximize your loan potential by offering the best possible loan-to-value ratios based on your mutual fund holdings.
Interest Rates
Loan interest rates secured by mutual funds are generally more favorable than those for personal loans. These rates typically vary between 9% and 11% per annum, depending on the lender and the type of mutual fund involved.
Debt mutual funds tend to offer lower rates compared to equity funds due to their lower risk profile.
Wallet4Wealth ensures you get the most competitive interest rates, helping you save more while accessing the funds you need.
Risks and Limitations
Potential Risks
- Market Risk: If the value of your mutual fund units falls sharply, the lender may ask for additional collateral or partial repayment.
- Interest Burden: Failure to repay the loan on time will lead to interest accumulation and penalties.
How to Apply for a Loan Against Mutual Funds
You can apply for a loan against mutual funds by visiting our branch or contacting us at 9124655100 or 9124655104 for more information. Our team at Wallet4Wealth will guide you through the seamless process, ensuring quick approvals and minimal paperwork.
Conclusion
A loan secured by mutual funds provides rapid access to capital at a reduced expense. Nevertheless, it is crucial to manage repayments diligently to prevent any financial difficulties.
Additionally, ensure that you review the terms and associated risks before using your mutual fund units as collateral for a loan.
Key Takeaways:
✔ Loans against mutual funds are secured loans, offering funds without selling investments.
✔ You can get up to 50% on equity funds and 70-80% on debt funds.
✔ Interest rates are lower than personal loans, ranging from 9% to 11% annually.
✔ Online application and quick approvals make it a hassle-free option.
✔ Understand the risks before opting for a loan to ensure financial security.
Wallet4Wealth is your trusted partner in securing loans against mutual funds. Visit our branch or call us at 9124655100 or 9124655104 to get started today and unlock the true potential of your investments!
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This blog is purely for educational purposes. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.
