Avail loans against mutual funds

3 MinsJune 12, 2023

The investment world offers numerous opportunities to grow your wealth and secure your financial future. One such popular investment choice is Mutual Funds.

Avail Loans Against SIPs and Mutual Funds

However, many investors don't realise that they can leverage these investments to meet their immediate monetary needs without liquidating their assets. In this article, we will guide you through the process of taking a Loan Against your Mutual Funds and help you unlock the full potential of your investments.

Understanding Loans Against Mutual Funds

A Loan Against Mutual Funds is a secured loan where your investments in Mutual Funds act as collateral. By pledging your investment units as security, you can access funds without liquidating your assets, allowing your investments to continue growing while you meet your financial needs.

Benefits of Loans Against Mutual Funds

No need to liquidate investments: You don't have to sell your Mutual Fund units to access funds, enabling you to maintain your long-term investment plans.

Attractive interest rates: Since the loan is secured, interest rates are usually lower than unsecured loans like Personal Loans.

No prepayment charges

Quick disbursal: Once your loan is approved, you can quickly receive the funds in your account.

Eligibility criteria and factors to consider

Eligible investors: It is available for Indian residents, who are individuals within age of 18 to 75 only.

Mutual Funds eligible for loans: Not all mutual funds are eligible. Lenders usually have a list of approved fund houses and schemes from which you can pledge units. You can check the list for approved/eligible Mutual Funds here.

Loan-to-value ratio: The amount you can borrow depends on the value of your Mutual Fund units. Most lenders offer a loan-to-value (LTV) ratio ranging from 50% to 70% of the market value of your units. Axis Bank offers a loan-to-value ratio of up to 85%.

How to apply for a Loan Against Mutual Funds

Research lenders and their offerings: Begin by exploring various lenders and their loans against Mutual Fund offerings.

No documents are required to process 24x7 Loan Against Securities digitally. The loan is disbursed digitally within three minutes in three simple steps.

Pledge Mutual Fund units as collateral: You must pledge your Mutual Fund units as collateral for the loan. Follow your lender's instructions for completing the pledge process.

Await approval and disbursal: Once you have submitted your application and the required documents, the lender will evaluate your eligibility for the loan. Once approved, the funds will be disbursed to your account.

Tips for managing your Loan Against Mutual Funds

To make the most of your loan against Mutual Funds, consider the following tips:

  • Monitor your loan account and Mutual Fund investments: Regularly check your loan account and Mutual Fund investments through your lender's online portal or mobile app. This will help you stay updated on your loan balance, interest payments, and the performance of your investments.
  • Make timely interest payments: Ensure you make timely interest payments on your loan to maintain a healthy credit score and avoid penalties.
  • Plan for principal repayment: Remember that you must repay the principal amount at the end of the loan tenure. Develop a repayment strategy to ensure that you have the necessary funds available when the time comes.
  • Monitor market fluctuations and adjust if necessary: The value of your Mutual Fund units may fluctuate due to market conditions. If the value of your investments drops significantly, you may need to pledge additional units as collateral or explore other options to maintain the required LTV ratio. Stay informed about market trends and adjust your loan and investments as needed.

Also Read: [Want to make lump sum investment in Mutual Funds?]

Summing up

One such offering that can help you access funds without liquidating your investments is the Loan Against Mutual Funds by Axis Bank. Taking a loan against your Mutual Funds can be an excellent way to meet your financial needs while allowing your investments to grow. By understanding the benefits, eligibility criteria and application process, you can leverage your investments to address immediate monetary requirements.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.