Loan Against Mutual Funds: A Smart Way to Access Funds Instantly

Ever found yourself in urgent need of cash but didn’t want to break your investments? Be it a medical emergency, a big-ticket purchase or an unexpected expense, selling your mutual funds was not always your first preference or the best move. That’s where a Loan Against Mutual Funds (LAMF) comes in handy! 

Instead of redeeming your investments, you can simply pledge them as collateral and get funds instantly — all while your money continues to grow in the market. Sounds like a win-win, right?  

Read on to know how this works and why it’s a smarter way to borrow. 

What is a Loan Against Mutual Funds? 

A loan against mutual funds allows you to borrow money by pledging your mutual fund holdings as security. The amount you can get depends on the type and value of your mutual fund investments. Usually, equity funds offer lower loan amounts (around 50% of their value), while debt funds allow higher loan-to-value (up to 80%). 

Since the loan is secured, the interest rates are lower than personal loans or credit cards. You continue to own your investments, and they keep growing, making it a great alternative to selling them in times of need. 

Why Opt for a Loan Against Mutual Funds? 

Here’s why this type of loan can be a game-changer: 

• Retain Your Investments – Your mutual funds stay invested, allowing you to benefit from market growth while using the loan for urgent financial needs. 
• Lower Interest Rates – Compared to unsecured loans, LAMF offers lower interest rates, making it a cost-effective option. 
• Quick and Hassle-Free Process – The approval process is smooth and 100% digital with minimal documentation and quick disbursal. 
• Flexible Repayment – You pay interest only on the amount utilised, reducing your overall cost. 
• No Impact on Credit Score – Since the loan is secured, it does not negatively impact your credit score like an unpaid credit card bill might. 

How to Apply for a Loan Against Mutual Funds? 

Getting a loan against mutual funds is simple. Here’s how it works: 

• Check Eligibility – Ensure you have mutual fund units in eligible fund houses that can be pledged. 
• Choose a Lender – Select a financial institution offering LAMF with favourable terms. 
• Pledge Your Mutual Funds – Provide details of the mutual funds you wish to pledge. The lender places a lien on these units. 
• Loan Processing & Approval – Once verified, your loan is approved, and the amount is disbursed to your account. 
• Repay as Needed – Pay interest only on the amount you use and repay flexibly. 

Who Can Apply and What Documents are Required? 

Most lenders have simple eligibility criteria and minimal requirement for documentation: 

Eligibility Criteria 

• Indian resident above 19 years 
• Holding mutual funds in a recognised fund house 
• Valid bank account and KYC documents 
• Minimum investment value of MF units should be ₹20,000* 

Documents Required 

• PAN Card 
• Aadhaar Card 
• Mutual Fund Statement 
• Bank Account Details 

Conclusion 

Now that you know about Loan Against Mutual Funds (LAMF), consider it as your one of the smartest ways to access quick cash without selling your investments.  
What’s best? You only pay interest for what you use and repay at 0 foreclosure charges. Need a hassle-free loan? Fibe’s Loan Against Mutual Funds gives you instant access to funds with a 100% digital process and competitive rates. Get up to ₹10 lakhs in just a few clicks. Download the Fibe app or visit the website today!  

FAQs on Loan Against Mutual Funds 

1. How quickly can I get the funds? 

Most lenders disburse the amount within 24 hours of loan approval. With Fibe, you can get up to ₹10 lakhs in just a few minutes.  

2. Is a loan against mutual funds a good option? 

Yes, the low interest rate makes it an ideal option for quick access to cash. While it’s a secured loan, you will still be invested in the market, growing your portfolio. 

3. What are the interest rates for these loans? 

Interest rates generally range between 8-10% p.a., depending on the lender. 

4. How much loan can I get? 

The loan amount totally depends on the type of funds you have: 

• Equity Mutual Funds: Up to 50-60% of the market value 
• Debt Mutual Funds: Up to 80-85% of the NAV 

5. What are the key benefits? 

Below are the listed benefits of loan against mutual funds: 

• Your investments remain untouched and continue earning. 
• Lower interest rates compared to unsecured loans. 
• Instant liquidity without selling your assets.