In a world where liquidity is key, many investors are now choosing to borrow against their mutual fund holdings rather than liquidating them. If you’re looking to meet short-term financial needs without disrupting your long-term wealth creation plans, a Loan Against Mutual Funds (LAMF) might be the ideal solution.
✅ What is a Loan Against Mutual Funds?
A Loan Against Mutual Funds is a secured credit facility where you pledge your mutual fund units—equity or debt—as collateral to avail a loan from banks or NBFCs. This option allows you to raise funds without selling your investments or losing the potential to earn future returns.
🔍 How Does It Work?
Here’s how the process typically works:
- Step 1: Pledge Mutual Fund Units
You authorize the lender to mark a lien on your mutual fund units via CAMS or KFintech. - Step 2: Loan Evaluation and Approval
Based on the type and value of your funds, lenders offer an LTV (Loan-to-Value) ratio—up to 50% for equity funds and up to 80% for debt funds. - Step 3: Disbursement
The loan is disbursed to your bank account, often within 24–48 hours. - Step 4: Interest and Repayment
Interest is charged only on the amount you use, with flexible repayment tenures and prepayment options.
🎯 Key Features & Benefits
🎯 Key Features & Benefits
- 🔒 Retain Ownership: Your mutual fund investments remain intact—you don’t miss out on market upside.
- ⚡ Quick Access: Most lenders offer instant or same-day disbursal through digital processes.
- 💸 Cost-Effective: Interest rates are lower than unsecured loans, starting from ~9% per annum.
- 🔁 Revolving Credit: Many lenders offer overdraft or credit line facilities, allowing reuse without fresh paperwork.
📃 Eligibility and Documents Required
To apply for a mutual fund loan, you’ll need:
- PAN Card & Aadhaar Card
- Mutual Fund Statement
- Active bank account
- KYC compliance
Eligibility depends on the fund type, investment amount, and lender-specific criteria.
⚠️ Things to Keep in Mind
- Market Fluctuations: NAV drops may reduce your borrowing limit or trigger margin calls.
- Default Risk: Failure to repay may lead to sale of pledged units.
- Not for All Funds: Some ELSS or closed-ended funds may not be eligible.
📈 Popular Platforms Offering Loan Against Mutual Funds in India
Some of the leading platforms and banks providing this facility include:
- HDFC Bank
- ICICI Bank
- Axis Bank
- Zerodha (via Bajaj Finserv)
- Groww
- Paytm Money
📌 When Should You Consider This Loan?
- For short-term working capital
- Managing medical or family emergencies
- Funding higher education
- Avoiding high-interest credit card debt
This facility is best used for temporary liquidity needs—not long-term borrowing.
📣 Ready to Unlock Liquidity from Your Investments?
If you’re holding mutual funds and looking for fast, cost-effective financing, a Loan Against Mutual Funds could be your smartest option.
👉 Need help choosing the right lender or understanding eligibility?
Contact our expert advisors today for a free consultation and personalized loan assistance.