What is a Loan Against Mutual Funds?

A loan against mutual funds (LAMF) is a type of secured loan where your mutual fund units are pledged as collateral to borrow money. Instead of redeeming your investment — which could disrupt long-term financial goals or trigger capital gains tax — you can borrow a percentage of its value while your investment continues to earn.

Most financial institutions offer loans up to 50–70% of the fund’s current value, depending on the type of mutual fund (equity or debt).

Why Go Online?

The entire process of applying for a loan against mutual funds has become digital, which means:

• No paperwork
• No in-person visits
• Quick verification & approval
• Instant disbursal to your bank account

Thanks to integrations with platforms like CAMS and KFintech, lenders can instantly verify your mutual fund holdings and process loans in just a few clicks.

Key Benefits of Online Loan Against Mutual Funds

1. Instant Approval & Disbursal

Once your mutual fund holdings are verified, many platforms offer approvals in under 30 minutes, and funds can be transferred almost immediately.

2. Lower Interest Rates

Since this is a secured loan, the interest rates are much lower than personal loans or credit cards. Rates typically start from 8-10% p.a., compared to 13–24% for unsecured credit.

3. No Need to Sell Your Investments

Your mutual fund units remain invested and can continue to grow in value. You avoid the tax implications and market timing risks associated with redeeming them.

4. Flexible Repayment Options

Most lenders offer flexible tenures ranging from 6 months to 3 years. Some even allow part-payments or foreclosure with minimal charges.

5. No Impact on Credit Score

Since the loan is backed by an asset (your MFs), timely repayments can even help build or improve your credit score.

Eligibility & How to Apply

The eligibility is simple:

• You must own mutual funds (individual holdings, not joint or minors)
• You need to be KYC-compliant
• The funds must be from SEBI-recognized AMCs

Steps to Apply Online:

1. Visit your preferred lender or fintech platform.
2. Log in and provide PAN to fetch mutual fund details via CAMS/KFintech.
3. Select the schemes you wish to pledge.
4. Complete e-sign and other verifications.
5. Receive funds in your account.

Popular platforms offering this service include Bajaj Finserv, ICICI Bank, HDFC Bank, Groww, and others.

Things to Keep in Mind

• If the value of your pledged mutual funds drops significantly, the lender may ask for additional margin or liquidate your holdings.
• Ensure you understand the terms, fees, and any prepayment clauses.
• Avoid over-leveraging; borrow only what you need.

Conclusion

An online loan against mutual funds is a smart, efficient, and affordable way to manage short-term liquidity needs. With low-interest rates, instant approvals, and a completely digital process, it’s becoming the go-to choice for financially savvy individuals.