Loans Against Mutual Funds: A New Offering from smallcase!

At smallcase, we have always been committed to building a simple investment experience for all retail investors. 80 lakh+ users have supported us in this endeavour and helped us build a widely loved investment platform. Now, we are launching a new offering to help you do more with your investments with loan against mutual funds!

Introducing Loan Against Mutual Funds on smallcase!

 Before getting right to it, let’s find out more about loans against mutual funds in general.

What is Loan Against Mutual Funds?

Similar to how you can take a loan against any collateral (gold, house, etc.) , you can also take a loan against your Mutual funds (MFs) as a collateral at a very competitive interest rate – at smallcase, this interest rate is at 10.75% per annum.

Which is Better – Breaking Investments or Taking a Loan Against Investments?

By breaking your investments, you are stopping compounding from doing its magic. It’s better to not hamper your long-term wealth journey for an immediate financial need. You can take advantage of your investments as collateral and take a loan against them while continuing to reap the benefits of your investments. 

Who can Take Loan Against Mutual Funds?

Any user who has mutual fund holdings can take a loan against their Mutual funds. There are no minimum credit score or other income requirements to be eligible for this loan.

What is the Mutual Fund Credit Limit? 

Mutual Fund (MF) credit limit is a loan that you can take against your MF investments as collateral. It’s calculated as a % of your investments based on the credit policy of the lender. 

For example, an investment of ₹1,00,000 in a NIFTY Index Fund can give you an MF credit limit of approximately ₹45,000-₹50,000. An investment of ₹1,00,000 in a Liquid Fund will give you an MF credit limit of ₹75,000-₹80,000. Debt MFs give you a higher credit limit because they are generally less volatile than equity. 

The minimum credit limit required to take a loan is decided by the lender, and currently, it’s defined at ₹25,000.

What Can You Use a Loan Against Mutual Funds For? 

You can take a LAMF for a variety of reasons, some of the use cases include :

• Lower interest rates than most loans
• Downpayment for high-ticket loans like house loans, car loans, etc.
• High-ticket expenses like wedding expenses, medical expenses, etc. 
• Refinancing an existing loan courtesy of lower interest rates offered by this loan
• A credit line that allows users to withdraw funds anytime and pay interest only on withdrawn funds

How is Loan Against Mutual Funds Different from Personal Loan?

The key differences between Digital Loan Against Mutual Funds & Personal lien marking loans are basis the following two parameters –  

• Lower interest rates: LAMF generally offers a more competitive interest rate than Personal Loans
• Only interest payment every month: In Personal loans, you have to pay a part of the principal amount and interest every month in the form of an EMI. 

In the case of Loans Against Mutual Funds, you pay only the interest every month with the freedom of paying the principal amount anytime you want at no extra cost. 

What is the Criteria for Eligibility for Loan Against Mutual Funds at smallcase?

Unlocking a mutual fund loan with smallcase is easy. Whether self-employed or salaried, residents of India aged 18-70, can apply for loans up to ₹5 Crore against approved Mutual Funds held with CAMS & KFintech.

What are the Documents Required to Take a LAMF at smallcase?

Mutual fund documentation varies among banks, with key documents like identity, address, employment proof, and ownership confirmation. 

Opting for a loan against MF on smallcase? 

Enjoy a hassle-free process with no detailed document requirements—get funds with zero formalities!

How to apply for a Loan Against Mutual Funds?

You can get a LAMF through a completely paperless & digital process that can be completed in 5 minutes on the smallcase app.

Here are the steps to follow –

1. Login on the smallcase app
2. Go to the More tab, click on Loan Against Mutual Funds
3. Check your MF credit limit
4. Click on Apply Now
5. Import your MF Holdings & pledge the holdings depending on the loan amount
6. Sign the loan agreement
7. Get cash in your bank account within 2 working hours

How Can You Close the Loan?

You can close the loan anytime at no extra charges after paying back the principal and any interest that may be due for that month. 

After paying back the principal & any interest due, you have the option to retain the MF credit limit and withdraw funds again whenever you need them. You will pay interest only when you withdraw the funds otherwise you will continue to pay ZERO interest.

If you want, after loan closure you can also get the collateralized MFs unpledged, which will allow you to redeem/sell these MF investments as well.

What more can I do with Mutual Funds on the smallcase Platform?

Along with taking a loan against Mutual Funds, you can now also start tracking your net worth including all your external Mutual Funds, stock & ETF holdings that you have bought outside of the smallcase platform. This is in addition to continuing to track your smallcase investments. 

You can track your net worth by following the below steps :

1. Go to the Investments tab
2. Import your Mutual Fund holdings by entering a single OTP
3. Import your stock & ETF holdings by connecting your demat account
4. Track your overall & asset-specific net worth

We are just starting to build out the Loan Against Mutual Funds offering, so we would love to hear your feedback & queries. Please drop us your questions or suggestions at help@smallcase.com.

To know more about Loan Against Mutual Funds on smallcase, please refer to the FAQs below or a more detailed list of questions here.

FAQs

All About Loan Against Securities & Loan Against Mutual Funds on smallcase – 

smallcase offers quick and easy disbursement of loans against securities ( LAMF), all about eligibility, documents, features and benefits of Loan against mutual funds and the process for applying for loan is just one click away –