So, you have got mutual funds in your portfolio and now you need some quick cash? Maybe it’s an emergency, a wedding, a home renovation, or just a financial crunch. Selling your mutual funds might not be the best idea, especially if the market is down. But don’t worry, there is a smart option you can explore: getting a loan against mutual fund.
Sounds interesting, right? In this blog, we will break it all down in a very simple way, what is a loan on a mutual fund, how to get it, the interest rates, eligibility, and more.
What is a Loan Against Mutual Funds?
Let’s start with the basics. A loan against mutual funds is a type of secured loan where your mutual fund units act as collateral. It’s similar to a loan against property or gold. You don’t have to sell your funds; you just pledge them to the bank or lender, and in return, they give you a loan based on the value of your holdings.
You continue to remain the owner of your mutual fund investments, and they even keep growing with the market. Pretty sweet deal, no?
Why Take a Loan on a Mutual Fund?
Now, you might ask, “Why should I take a loan on a mutual fund instead of using other options like personal loans or credit cards?”
Here’s why:
- Lower interest rate compared to unsecured loans like personal loans or credit cards.
- No need to break your investment or redeem your mutual funds.
- You get quick and easy access to cash.
- Flexible repayment options.
- You continue to earn returns on your investments during the loan period.
So basically, you get money in hand while your investment is still working for you.
Advantages and Disadvantages
| Advantages | Disadvantages |
| Continue to earn returns on pledged funds | Risk of margin call if NAV drops significantly |
| Lower interest rate than unsecured loans | Limited to the LTV ratio set by lender |
| Fast online processing and disbursal | Fees and charges add to overall cost |
| Flexible repayment options | Default may lead to sale of units by lender |
How Much Loan Can You Get?
This is where it gets interesting. The loan amount depends on the type and value of your mutual funds.
- For equity mutual funds, lenders usually offer 50–60% of the fund’s value.
- For debt mutual funds, the loan-to-value (LTV) ratio is higher, around 70–80%.
Let’s say you have ₹5 lakhs worth of equity mutual funds. You might be eligible for a loan of around ₹2.5 to ₹3 lakhs.
The exact amount varies from lender to lender, and also depends on market volatility and the type of mutual fund scheme.
Loan Against Mutual Funds Interest Rate
The loan against mutual funds interest rate is one of the best parts of this deal. Since the loan is secured, the interest rates are much lower than unsecured personal loans.
Typically, the interest rates start from 9% and go up to around 13% per annum. Of course, it depends on your credit profile, the lender’s terms, and the fund type.
Some banks may offer even lower rates if you’re already a trusted customer or if the funds are from top-performing schemes.
Comparison of Banks, NBFCs, Fund Houses
| Lender Type | Interest Rate Range | LTV Ratio | Processing Time | Notable Feature |
| Banks | 9%–12% | 70%–75% | 2–3 business days | Trusted, but slower processing |
| NBFCs | 10%–14% | 75%–80% | 24–48 hours | Higher LTV, faster |
| Fund Houses | 8.5%–11% | 70%–90% | 24 hours | Direct, seamless link to folio |
Read More: Best Car Loan Bank in India: Compare Car Loan Interest Rates
Loan Against Mutual Funds Eligibility
Okay, so who can apply?
The loan against mutual funds eligibility is quite relaxed. Most people who have mutual fund investments can apply. Here’s a quick checklist:
- Indian resident
- Mutual funds held in demat or statement of account (SoA) form
- Valid KYC documents
- Regular income (not always mandatory but good to have)
Even companies or HUFs (Hindu Undivided Families) can apply in many cases.
How to Get Loan Against Mutual Funds Online
You don’t even have to step out of your house. Thanks to digital banking, you can now get loan against mutual funds from the comfort of your home. Here’s how:
- Choose a lender – Banks like HDFC, ICICI, Axis Bank, and NBFCs offer this facility. Oh By the way, you can find all this at one place – BigMudra, your one stop solution for all your financial needs.
- Visit their website or app – Look for the ‘loan against securities’ section.
- Login and verify your details.
- Select your mutual funds from the linked demat or folio account.
- Accept the pledge agreement – this allows the lender to keep the units as collateral.
- Get the loan disbursed directly to your bank account.
Simple, fast, and paperless in many cases.
Documents Required
Not a long list. Most lenders ask for:
- PAN card
- Aadhaar card or any valid address proof
- Mutual fund holding statement or demat account details
- Bank account details for disbursement
- Signed loan agreement (digitally or physically)
Sometimes, they might also ask for income proof, especially if the loan amount is high.
How Does Repayment Work?
Repaying a loan against mutual funds is also quite flexible. You can choose to:
- Pay only interest every month and principal at the end
- Go for EMI option (interest + principal together)
- Prepay anytime if you want to close early (some lenders charge a small fee, some don’t)
If you don’t repay on time, the lender can sell your pledged units to recover the money. So, it’s always better to plan your repayment properly.
Instant Loan Against Mutual Funds: Is It Real?
Yes, it’s absolutely real. Many fintech platforms and apps now offer instant loan against mutual funds online, some in just a few hours. These platforms directly connect with CAMS or Karvy to check your MF holdings and process the loan instantly.
You can even check your eligibility in real-time and get approval in minutes. That’s how fast and tech-driven the financial world has become.
Things to Keep in Mind
Before you go ahead and apply, here are a few tips:
- Always compare interest rates from different lenders
- Check processing fees and other hidden charges
- Understand the margin call policy of the lender
- Read the pledge agreement carefully
- Try to repay as early as possible to save on interest
Conclusion
A loan against mutual funds can be a life-saver during tough times. It’s a smart way to use your investment without actually breaking it. Whether you want to handle an emergency, plan a trip, or fund a business idea, a loan on a mutual fund is flexible, quick, and reliable.
But as always, take a well-informed decision. Don’t take a loan just because you can. Use it wisely, and you will come out stronger, both financially and emotionally.
So, next time you are stuck but sitting on a decent MF portfolio, don’t panic. Just explore how you can get loan against mutual funds easily, and let your investments work double time for you!
