Loan Against Mutual Fund


Here are some of the most common mistakes people make when they invest in mutual funds-

Untimely withdrawal is like plucking a fruit before it is ripe-

Redeeming mutual fund units when the markets are down, when the stock market is going down, it may be hard to fight the urge to take your money out and put it somewhere else. But it’s important not to act hastily when the market is down. This is because equity mutual funds are meant to be long-term investments, and they usually don’t do well if you try to time the market.

A lot of funds -

Investors also often make the mistake of putting their money in too many funds to spread out the risk. But they don’t realize that when they put a lump sum of money in a lot of funds that they don’t need to, they don’t spread out the risk.

Only focusing on tax-saving funds-

Most people who invest in mutual funds also make the mistake of caring more about saving taxes than anything else. Investors should pay attention not only to funds that help them save on taxes but also to funds that help them make a lot more money from their investments.

Not considering potential risks-

Investments in money are always risky because that’s how they work. Even mutual funds have risks because they are tied to the market. When you invest in funds, you should always think about how much risk you can handle.

A loan against your mutual fund investment may help you avoid the worst mistake after investing.

Don't Redeem it, Loan it Instead

What is loan against Mutual Funds?

A loan against mutual funds is, as the name suggests, a way to borrow money by putting up your mutual fund units as collateral. When you give the bank the units as security, you still own them, but you can’t sell them.

Features and The Benefits of Loan Against Mutual Funds (LAMF) -

How does a loan against a mutual fund work?

In a loan against assets, the security for the loan is your mutual fund units. The third party will hold on to these units as protection until the loan is paid off in full.

While your mutual funds are with the third party, you won’t be able to sell them, but they will continue to earn interest.

You can’t take money out of the mutual funds until you’ve paid back the loan. But these fund units will still pay you income. When the loan is paid off, the lender can ask the fund house to remove the lien. A partial release of the lien is another option.

If the user doesn’t pay back the loan by the due date, the third party may make the lien stronger. This is what happens if you don’t pay back what you owe. In this case, the lender tells the mutual fund to buy back the units and send a check to the lender.

Why is a loan against a mutual fund a good choice for investors?

Most of us have probably been in a position where we needed money quickly to cover an expense we hadn’t planned for or couldn’t account for. In these kinds of situations, the first thing that comes to mind is getting our money back from our assets.

The next option is personal loans, credit cards, or cutting-edge things like buy-now, pay-later loans (BNPL). All of these loans are unprotected.

But you can also take out a loan against your mutual funds instead of selling them if you want to get credit at a much lower rate or don’t want to sell your mutual funds.

How to Apply for a Loan Against Mutual Funds?

The bank or non-banking financial company (NBFC) would want you to use your mutual fund units as security. Mutual fund units can be bought and sold in both physical and Demat form. If the units are in Demat form, they must be pledged with the depositories, such as NSDL or CDSL.

If your units are in your possession, the bank or NBFC will ask the Registrar and Transfer Agency (RTA), like CAMS or Karvy, to put a lien on the units you promised to the bank or NBFC.

Please beware that once your mutual fund units are “committed” (put on hold) with the bank or NBFC, you can’t get them back until the loan is paid off. But you still keep your mutual fund units and make use of all the benefits that come with them.

Top Bank's Loan Against Mutual Funds and Securities Interest Rates

These banks’ procedures are lengthy and time-consuming. Against these banks, our company, Swaraj Finpro, provides loans such as:

  • The process is very smooth and completed in a short time span.
  • You can get a loan within 5 minutes.
    100 % Digital Process

We look forward to a new investment with you this year.

Ajay Kumar Jain,
Swaraj FinPro Pvt. Ltd.
+919993025625   (Call or WhatsApp)

Mutual Fund Investments are subject to market risk, read all scheme related documents carefully.