How to Get a Loan Against Mutual Funds?

Are you in need of funds but hesitant to liquidate your mutual fund investments? Do you know that your mutual fund investments can serve as collateral to secure a loan?  In case you’re in need of funds but don’t want to sell your mutual funds, an instant Loan Against Mutual Funds (LAMF) can be a convenient and flexible option.

Even though getting a loan looks like a cumbersome and mammoth task, let’s go through the process of applying for a loan against mutual funds. From understanding the eligibility criteria to exploring the documentation requirements, we’ve documented it all.

How to Apply For a Loan Against Mutual Funds (LAMF)?

Applying for a digital Loan Against Mutual Fund (LAMF) is a fairly simple process. The usual steps include –

1. Checking eligibility
2. Applying for the loan
3. Documentation and other KYC processes
4. Lien Marking; and
5. Disbursement

We’ve tried to provide you with a seamless journey on smallcase; here’s how you can go about it:

1. Find out which mutual funds are eligible

Generally, equity and hybrid schemes offer loans of up to 50% of their value, while debt schemes can provide loans of up to 80% of their value. To facilitate loans against mutual funds, there are more than 6000 approved schemes available in the equity, debt, and hybrid categories. You can check the list of approved mutual funds on the smallcase app.

2. Add a Bank Account

Once you select the mutual fund for LAMF, link your bank account for seamless fund transfer and automatic monthly interest debits.

3. Pledge your holdings with the lender

Pledge your holdings with the lender to get a confirmation of your loan amount. Keep in mind that with smallcase, you can get a loan against mutual funds from ₹25,000 to ₹50,00,0000. 

4. Sign the loan agreement

After deciding the loan amount, sign the online loan agreement and wait for your request to get processed. 

After reviewing your application, the lender will process your loan request and if approved, the loan amount will be transferred to your designated bank account.

What are the Costs Associated with Loan Against Mutual Funds?

The interest rates for an instant loan against mutual funds are generally lower compared to personal loans due to the presence of collateral. Processing fees and foreclosure charges are usually minimal or even waived.

You can check out all the costs associated with Loan Against Mutual Funds (LAMF) via smallcase in the table below:

What Will Happen If An Interest Repayment Is Not Made?

In case of missed interest payment, a bounce charge of Rs. 1200 will be applicable, along with a penal interest of 2% per month on the due amount until the actual payment is made. 

Do I Need to Repay the Loan With EMI on a Monthly Basis?

Unlike traditional EMI-based loans, there is no monthly repayment obligation for this loan. You have the flexibility to repay the outstanding principal amount, either in full or in part, at any time. Only the interest on the outstanding loan balance will be automatically debited from your linked bank account on a monthly basis.

To Sum It Up

Applying for an instant loan against mutual funds online can be a convenient and efficient way to access funds when needed. By following the steps outlined in this blog, you can navigate the process smoothly and increase your chances of obtaining a loan that suits your financial requirements. 

Moreover, remember to carefully consider your financial goals, assess the terms and conditions of the loan, and choose a reputable lender. With proper planning and informed decision-making, you can leverage your mutual fund investments to meet your financial needs and achieve your goals.

In case you have any concerns or questions, please feel free to reach out to us on help@smallcase.com; we’d love to help!

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