How To Get A Loan Against Mutual Funds?

Mutual funds are a reasonable investment product due to diversification, professional management, and ease of use. When you are becoming a mutual fund investor, you are investing in a mix of different asset types consisting of a variety of different underlying investments such as stocks, bonds, or other investment securities managed by qualified fund managers spread across the risk of multiple investments. Therefore, you can get exposure to many investments without having to spend any money buying each investment individually. It is typically easy to buy and sell mutual fund units electronically or through your brokerage account. Mutual funds can be risky with some potential for capital appreciation and possible income to living costs. But that is the question, can we take loans against mutual funds? Yes we can. How? Let's find out

What Is A Loan Against Mutual Funds?

A loan against mutual funds is a secured loan that uses your mutual fund investments as collateral. You take out a loan for the value of your mutual funds.

How To Get Loan Against Mutual Funds

To get a loan on mutual funds:

1. Look for a lender by asking banks or other financial institutions that provide loans against mutual funds.

2. Check that you qualify with the lender's outlined eligibility requirements (age, income, credit history, etc.).

3. Provide all the documentation that the lender will ask for, such as mutual fund statements, KYC data, and evidence of income.

4. The lender will evaluate your application and sanction you with a loan amount, depending on the value of your mutual fund holdings.

5. Once approved finally, the loan amount will be credited to your bank account.

Key Features

Eligibility

• Individuals should be above the age of 18.

For online facility:

• Customer's bank account (savings/current) should be in single name only.

• MF holding with CAMS should be maintained in a single name alone.

• Bank accounts and MF accounts have to have similar PAN numbers.

• Bank accounts and MF accounts have to have similar mobile numbers.

• Bank account and MF account have to have similar email ID.

• Joint account holders can only avail loan from Branch.

Documentation

The following documents are required if loan is availed through Branch:

• Application Form

• Passport size photograph

• Proof of Identity

• Proof of residence / Proof of official address (for others than Employee)

• Proof of Income

• Letter of request by investor for Lien marking

• Declaration

• Letter of Authorization to recover non-serviced interest

How To Get A Loan Against Mutual Funds Online?

To get a loan against your mutual funds online, you can follow these steps:

1. Find a lender : Many financial institutions offer loans against mutual funds. Find and compare the interest rates, fees, and eligibility criteria for each lender; they vary widely.

2. Determine your eligibility : Most lenders will have some minimum eligibility requirements which may include: minimum amount invested in mutual funds or other qualifying criteria.

3. Gather the required documents : You will need to provide your KYC details, mutual fund statements, and any other documents required by the lender.

4. Submit your application : Fill out the online application form and attach the required documents.

5. Approval and Disbursement of Loan : Once the lender receives and approves the application, your loan amount will be disbursed to your account.

The specific process and documentation may vary from lender to lender, so be sure to read all terms and conditions before applying for a loan!

Check out these blogs: How to Choose Mutual Funds for Investment in India?

Advantages Of Loans Against Mutual Funds

Loans against mutual funds have some positive aspects:

1. Rapid Access to Funds : This type of loan is collateralized by your mutual fund investments, meaning you can access funds quickly, typically in a couple of days.

2. Reduced Interest Rates : Interest rates on loans against mutual funds tend to be lower than other unsecured debt.

3. Flexible Repayment Terms : You can choose a repayment that is suitable for your budgeting needs.

4. Keep your investments benefiting : You can take funds from your investment, and at the same time benefit from the growth of your mutual fund investment.