Loans Against Your Mutual Fund
Loans Against Your Mutual Fund allow you to unlock the value of your investments without having to sell them. Here’s how it works:
Leverage Your Investments: You can borrow money by pledging your mutual fund units as collateral, ensuring you maintain your portfolio’s growth potential.
Quick and Easy Access to Funds: Get immediate access to liquidity without disrupting your long-term financial goals.
Affordable Interest Rates: Loan interest rates are often lower compared to personal loans or credit cards.
Flexible Repayment: Continue earning on your mutual fund while you repay the loan at your convenience.
It’s a smart way to meet short-term financial needs while keeping your investments intact for future growth.
Key Features
Loan Against Mutual Funds (LAMF) is a financial product that allows you to borrow money by pledging your mutual fund investments as collateral. This offers a convenient way to access funds without having to redeem or sell your investments. Here’s a more detailed breakdown:
Key Features of Loans Against Mutual Funds:
Access to Quick Liquidity:
If you need funds for short-term financial needs like medical emergencies, business expansion, or education, you can avail of a loan against your mutual fund holdings. This eliminates the need to sell your mutual fund units, allowing you to maintain your investment while gaining access to cash.
Leverage Without Selling:
The biggest advantage is that your investments continue to grow even when pledged as collateral. You don’t lose out on potential market gains, dividends, or other income that your mutual fund investments generate.
Loan Amount:
The loan amount typically ranges between 50% to 80% of the current value of your mutual fund units. The exact amount will depend on the type of mutual funds (equity, debt, hybrid) and the lender’s policies.
Low-Interest Rates:
Compared to personal loans or credit cards, loans against mutual funds generally offer lower interest rates, as they are secured by your investments. The interest rates can vary based on the lender and the type of mutual funds you pledge (debt mutual funds often attract lower rates than equity funds).
Flexible Repayment Options:
You can choose from flexible repayment options, including interest-only EMIs or regular principal and interest payments, depending on the lender’s terms. The loan tenure can vary, and you can close the loan anytime by paying off the borrowed amount.
