A Loan Against Mutual Funds (LAMF) is a smart and convenient way to unlock the value of your mutual fund investments without having to liquidate them. This facility enables you to borrow funds by pledging your mutual fund units as collateral, providing you with a quick and flexible financing solution while your investments continue to earn returns.

The process of availing a loan against mutual funds is simple and hassle-free. You can pledge a wide range of mutual fund schemes, including equity and debt funds, and get access to funds based on the loan-to-value (LTV) ratio offered by the lender. The interest rates for such loans are generally competitive, making it a cost-effective option compared to personal loans or credit cards.

Which is Better – Breaking Investments or Taking a Loan Against Investments?

By breaking your investments, you are stopping compounding from doing its magic. It’s better to not hamper your long-term wealth journey for an immediate financial need. You can take advantage of your investments as collateral and take a loan against them while continuing to reap the benefits of your investments.

Who can Take Loan Against Mutual Funds?

Any user who has mutual fund holdings can take a loan against their Mutual funds. There are no minimum credit score or other income requirements to be eligible for this loan.

What is the Mutual Fund Credit Limit?

Mutual Fund (MF) credit limit is a loan that you can take against your MF investments as collateral. It’s calculated as a % of your investments based on the credit policy of the lender.

For example, an investment of ₹1,00,000 in a NIFTY Index Fund can give you an MF credit limit of approximately ₹45,000-₹50,000. An investment of ₹1,00,000 in a Liquid Fund will give you an MF credit limit of ₹75,000-₹80,000. Debt MFs give you a higher credit limit because they are generally less volatile than equity.

The minimum credit limit required to take a loan is decided by the lender, and currently, it’s defined at ₹25,000.

What Can You Use a Loan Against Mutual Funds For?

You can take a LAMF for a variety of reasons, some of the use cases include :

• Lower interest rates than most loans.
• Down payment for high-ticket loans like house loans, car loans, etc.
• High-ticket expenses like wedding expenses, medical expenses, etc.
• Refinancing an existing loan courtesy of lower interest rates offered by this loan.
• A credit line that allows users to withdraw funds anytime and pay interest only on withdrawn funds.

How is Loan Against Mutual Funds Different from Personal Loan?

The key differences between Digital Loan Against Mutual Funds & Personal lien marking loans are basis the following two parameters –

• Lower interest rates :: LAMF generally offers a more competitive interest rate than Personal Loans.
• Only interest payment every month :: In Personal loans, you have to pay a part of the principal amount and interest every month in the form of an EMI.

In the case of Loans Against Mutual Funds, you pay only the interest every month with the freedom of paying the principal amount anytime you want at no extra cost.

What is the Criteria for Eligibility for Loan Against Mutual Funds at smallcase?

Unlocking a mutual fund loan with smallcase is easy. Whether self-employed or salaried, residents of India aged 18-70, can apply for loans up to ₹5 Crore against approved Mutual Funds held with CAMS & KFintech.

To make this process seamless, we assist you in pledging your mutual fund units and guide you through the loan application process. Our platform ensures a smooth experience, allowing you to track your loan status, interest payments, and repayment schedules effortlessly. We also provide personalized advice to help you make informed decisions regarding leveraging your mutual fund investments.

Whether you need funds for an emergency, business expansion, or any other financial requirement, a Loan Against Mutual Funds offers a reliable and efficient solution. Enjoy quick disbursement, competitive interest rates, and the flexibility to meet your financial goals without disrupting your investment portfolio.

DISCLAIMER -

Loan Against Mutual Funds (LAMF) is subject to approval by the respective lender and their terms and conditions. The value of the mutual fund units pledged as collateral may fluctuate based on market conditions, which can impact the loan-to-value ratio. Non-repayment of the loan may result in the sale of pledged mutual fund units to recover the outstanding amount. Borrowers are advised to carefully read the terms and conditions of the loan agreement and seek professional advice before opting for a Loan Against Mutual Funds. This information is provided solely for informational purposes and does not constitute financial advice.