Why loan against mutual funds is a convenient option for investors

4 MinsDec 29, 2022

How prepared are you for a financial crisis or an urgent need for funds? Will you be able to handle it without draining your savings? To put together a large sum of money on short notice to cover unforeseen events requires a lot of work. Consequently, your monthly budget may suffer due to such unaccounted spending. 

Why loan against mutual funds is a convenient option for investors

In such a situation, one option is to redeem your investments. But what if they are at a lower price? Even if you try to redeem your Mutual Funds for emergency, you will only get your funds after at least 2-3 working days. Doesn’t seem like a good option, does it? Instead you can avail Loan against mutual funds with Axis Bank’s 24x7 Loan Against Securities in just 3 minutes, from the comfort of your home.

The other options available at your disposal are to take a personal loan or subscribe to buy now and pay later products. However, these are unsecured loans that are not backed by any financial assets and account for a higher interest rate.

But what if there was another option to avail loan? You can now avail loan against your mutual fund investments instead of redeeming them. Why break your precious long term investments for some emergencies. Lien mark mutual funds and instantly raise money.

On that note, let’s explore why a loan against mutual funds is viable for investors like you.

Loan against Mutual Funds

Mutual funds are new-age tools that serve as a potential avenue to create wealth. Moreover, if you urgently need money, mutual funds let you avail loan against your investments as long as you meet the eligibility criteria. A loan against mutual funds acts as a loan against property, giving you the much-needed flexibility to avail funds without the need to redeem your mutual fund investments. Loan against mutual funds is a secured loan but offers benefits of unsecured loan as well. LAMF has lower interest rates that are just like a secured loan and offers instant disbursement like an unsecured loan. So, LAMF gives you best of both worlds, secured and unsecured.

You can eventually pledge your mutual fund investments with a Non-Banking Financial Company (NBFC) or a bank to avail a loan. Your loan will depend on the value of the mutual fund units. With the emergence of the digital revolution, many banks offer loans against mutual funds digitally without much paperwork. Axis Bank offers Loan against Mutual Funds in just 3 minutes in 3 simple steps without any need for documentation.

Benefits of Axis Bank’s Loan against Mutual Funds:

You can avail loan against mutual funds with Axis Bank’s 24x7 Loan against securities anytime, anywhere, with zero documents required and in just 3 steps.

Overdraft facility:
You get an overdraft limit on your account by pledging your mutual funds, which allows you to withdraw only when needed and pay interest only on the amount utilised and for the period of utilisation.

Higher amount against NAV:
Axis Bank disburses loans up to 50%-60% of the Net Asset Value (NAV) on Equity Mutual Funds. You can get loans up to 80% of the Net Asset Value of Debt Mutual Funds for debt funds. With Equity and Debt Mutual Funds, you can get funds up to 10 lakh and 1 Cr respectively, instantly.

[Also Read: Get an instant loan against your financial investments ]

Here are some other of the benefits of availing loan against Mutual Funds .

  • Loan against mutual funds is much simpler and more accessible than other loan application processes.
  • The approval and disbursement process in the case of a loan against mutual funds is relatively quick compared to other loan processes.
  • You don’t have to liquidate your mutual fund holdings at a compressed or lesser price while availing of a loan against a mutual fund.
  • In the case of a loan against a mutual fund, there is no system of payment of EMIs. You get the flexibility to pay at your convenience.
  • Compared to a personal loan, the interest rate is lower.
  • Loan against Mutual Fund works remarkably well when you do not have a credit history to show.
  • You do not have to account for any additional charges, and no other charges are levied in case of prepayments.
  • Availing of a loan against Mutual Fund does not hamper your monthly SIPs and wealth creation.

How to avail loan against mutual funds at Axis Bank:

Loan against mutual funds can be availed both digitally and physically. With digital application you get instant disbursal at best interest rate.

1.   Login with Internet Banking and mobile banking credentials 

2.   Select securities and their units to pledge 

3.   Confirm Drawing Power (Loan amount), charges and account to pay with 

4.   Enter OTP to confirm the loan 

Apply Now 

You need to note that once you have pledged some or all of the Mutual Fund units, you won’t be able to redeem them until you close and settle your Loan against Mutual Funds.

In the context of investing wisely in the financial markets, a loan against a mutual fund is an alternative way of arranging funds for contingencies. However, due to a lack of awareness and financial literacy, only a few investors know about this option. A knowledgeable and well-informed investor like you should be first aware of the risk and return of availing a loan against a mutual fund. However, it is always advisable to read the offer document before investing, and in case of doubt, it is wise to reach out to your financial expert.

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.