Aditya Birla Loan Against Mutual Funds: Features, Benefits, Interest Rate
Managing liquidity while maintaining investments is crucial for investors who want to meet short-term financial needs without disrupting their long-term wealth-building strategy. Aditya Birla Finance’s Loan Against Mutual Funds (LAMF) offers an efficient way to unlock funds while keeping investments intact. Whether it’s for business expansion, emergency expenses, or seizing a market opportunity, this facility allows investors to borrow against their mutual fund holdings without redeeming them—ensuring they continue to benefit from potential market appreciation. In this article, we explore the features, benefits, and application process of Aditya Birla’s LAMF, helping you assess its strategic value.
Loan Against Aditya Birla Mutual Funds on smallcase
Splitting your investments can limit the power of compounding. Instead of focusing solely on short-term profits, you may consider prioritising long-term wealth. One strategy is to leverage your investments for a loan, allowing them to continue growing while meeting immediate financial needs. With smallcase, you can secure a loan against your Aditya Birla mutual funds.
The process of mutual funds loan through smallcase is straightforward. Individuals from 18-70 years, including self-employed and salaried residents of India, can apply for loans up to ₹5 Cr against approved Mutual Funds held with CAMS & KFintech.
How to Get a Loan Against Aditya Birla Mutual Funds Without Selling Your MF Investments?
You can leverage your mutual fund investments to quickly establish a mutual fund overdraft without liquidating your holdings. With smallcase, you can access these funds within 2 working hours, using your mutual funds collateral, with an interest rate of 10.5% per annum.
Securing a Loan Against Mutual Funds (LAMF) through smallcase is simple. Just follow the steps provided below:
- Visit the smallcase app and log in with your credentials.
- Go to the ‘More’ section of the smallcase app and click ‘Loan Against Mutual Funds’.
- Tap on the ‘Apply Now’ button to start the application process.
- Add your Date of Birth (DOB) and PAN Card details to initiate the process.
- Enter the OTP to fetch your credit limit. Calculating your credit limit on smallcase will not have any impact your CIBIL score.
- Enter and check the loan amount after checking the credit limit.
- Link your bank account.
- Select the eligible funds you want to pledge. However, remember that once mutual fund units are pledged, they cannot be sold once the loan is closed.
- At last, sign the digital agreement for your loan.
For assistance, contact smallcase support at help@smallcase.com if needed.
Loan Against Mutual Funds (LAMF) offers tailored benefits for specific financial needs. Explore its potential to achieve your financial goals and secure a prosperous future.
Note: For the latest updates on interest rates, fees, and charges, visit the smallcase help centre for LAMF.
What is a Loan Against Mutual Funds (LAMF)?
Just like traditional assets such as gold or property, Mutual Funds (MFs) can also be used as collateral for a loan. Through smallcase, you can digitally mark your mutual funds lien, granting instant access to a loan without the need to sell or redeem your investments. This loan, functioning as an overdraft facility, provides flexibility in fund access and repayment without additional fees. Interest on the loan against mutual funds in Aditya Birla is only charged on the utilised amount for the duration it is utilised.
Aditya Birla offers a range of approved mutual funds for loans from various asset management companies in India that can be used as collateral. CAMS and KFintech (formerly KARVY) act as dependable Registrars & Transfer Agents (RTAs) to pledge mutual funds. For individuals seeking short or medium-term financial solutions by pledging their Aditya Birla MFs, exploring the smallcase Aditya Birla loan against MFs is one option.
Features of Loan Against Aditya Birla Mutual Funds
Here are some of the main features of loan against mutual funds on smallcase.
- Loan Amount: The online mutual funds loan is sanctioned based on the value of pledged mutual fund units, typically up to 45% for equity funds and up to 75% for debt funds.
- Flexible Repayment Options: Borrowers only pay monthly interest on the borrowed amount, and they can choose when to repay the principal within the 36 month tenure.
- Digital Processing: The entire loan application and approval process, whether it is a loan on equity mutual funds or a loan on debt mutual funds, can be completed online, ensuring a paperless and seamless experience. The entire process, from application to disbursement, should be completed in 2 working hours.
- No Prepayment or Foreclosure Charges: smallcase allows prepayment or mutual fund loan foreclosure without penalties, providing financial flexibility.
- Eligibility for Both Individual and Non-Individual Borrowers: This facility is available for retail investors, HNIs, and businesses, from the ages of 18-70, making it a versatile financing solution.
Documents Required for Loan Against Aditya Birla Mutual Funds
The documentation process on smallcase is straightforward, requiring:
- Identity Proof: PAN Card
- Address Proof: Aadhaar Card
- Bank Account Details: For loan against MF disbursement & interest auto-debit
Benefits of Loan Against Mutual Funds (LAMF)
Here are some of the benefits of loan against mutual funds on smallcase.
- Liquidity Without Liquidation: Investors can access funds without redeeming their mutual fund holdings, allowing their investments to continue compounding.
- Quick and Hassle-Free Processing: Compared to traditional loans, a digital mutual funds loan offers a streamlined approval process with minimal documentation, ensuring faster disbursal.
- Lower Interest Rates: Since the mutual fund overdraft is secured against mutual fund units, the interest rate is 10.5% which is generally lower than unsecured loans like personal loans or credit cards.
- Loan Tenure: Borrowers can choose mutual fund loan repayment anytime within 3 years of their loan tenure.
- No Impact on Investment Growth: The pledged mutual fund units remain invested in the market, allowing investors to benefit from potential capital appreciation and dividends. However, investors won’t be able to sell/redeem mutual funds during this period.
Maximum Loan Limit on Your Aditya Birla Loan Against Mutual Funds
Your credit limit is the highest amount you can borrow by leveraging your eligible mutual funds. The borrowing amount is determined by applying a percentage to the value of the mutual funds collateral. Loans on equity mutual funds have a borrowing percentage of 45%, while loans on debt mutual funds have a borrowing percentage of 75%. The minimum loan amount available against mutual funds at smallcase is ₹25,000.
Terms of Loan Closure, Charges & Interest
After paying off the principal and accrued interest each month, you can close your Aditya Birla loan against mutual funds without additional fees. Once closed, you retain your credit limit and can access funds as required, with interest applied solely on withdrawals. Furthermore, closing the loan allows you to release the mutual fund collateral, giving you the freedom to redeem or sell these investments.
Here’s a table of other fees, mutual fund loan charges & interest rates that you might want to check out if you are considering availing your Aditya Birla loan against mutual funds on smallcase:
| Fees & Charges | Details |
| Processing Fee | ₹999 or 1% of loan amount, whichever is higher, up to a maximum of ₹4999 (plus GST) |
| Late Payment Interest | Penal Interest: 2% per month |
| Bounce Charges | ₹1200 per bounce |
| Loan Top-Up Charges | None |
| Part-Prepayment Charges | None |
| Foreclosure Charges | None |
| Mandate Inactive Charges | None |
| Mandate Verification | Charged by your bank (typically between ₹0 to ₹150) |
| Lien Removal Charges | If requested after taking loan: None If loan is canceled before disbursement: Actual processing fee applicable |
| Collection/Legal Charges | In case of default: Actuals |
Taxation of Loan Against Mutual Funds
A Loan Against Mutual Funds (LAMF) is a secured loan, and the tax implications on mutual fund loan differ from those of mutual fund redemptions. Here’s how taxation works for LAMF:
- No Capital Gains Tax: Since you are pledging mutual fund units as collateral and not selling them, there is no capital gains tax liability. Your investments remain intact and continue to grow in value.
- Interest Payments Are Not Tax-Deductible: Unlike home loans or education loans, the interest paid on a loan against mutual funds is generally not eligible for tax deductions under the Income Tax Act.
To Wrap It Up…
In conclusion, Aditya Birla Loan Against Mutual Funds on smallcase offers investors a convenient option to unlock the value of their mutual fund investments without feeling the need to liquidate them. By leveraging their mutual fund holdings, individuals can access funds for various financial needs, such as emergencies, education, or business expansion, while benefitting from potential market growth and continuing to earn returns on their investments.
Frequently Asked Questions (FAQs)
Yes. You can easily transfer your Aditya Birla funds to smallcase and instantly discover your maximum mutual funds loan eligibility. You can apply for a loan directly through the smallcase app. Plus, you can also leverage your other mutual fund holdings for loans at smallcase.
Your credit limit corresponds to the highest loan amount you can obtain using your eligible mutual funds as collateral. It’s determined by applying a percentage to the value of your chosen mutual funds. Equity mutual funds allow for a 45% lending percentage, whereas debt mutual funds allow for an 75% lending percentage at smallcase.
At smallcase, you can borrow against your Aditya Birla mutual funds for up to 3 years, with no penalty for early mutual fund loan repayment.
No. If you request one after pledging your Aditya Birla mutual funds for a loan, there are no lien removal charges.
The default tenure of loan repayment for LAMF at smallcase is 36 months.
Certainly! Although you can continue to earn returns on your Aditya Birla mutual fund investments after using them as collateral for a loan through smallcase, you cannot sell or redeem these funds until the loan is fully repaid.
No. Although you can continue earning returns on your Aditya Birla Mutual Funds even after pledging them as collateral, you cannot sell/redeem those mutual funds until the loan is repaid.
Investing more in pledged mutual funds, either as a lump sum or through SIP orders, won’t affect your investments. You will retain complete control over these investments, as they don’t automatically become pledged. Additionally, when you pledge funds for loans on smallcase, any Active System Transfer Plan (STP) or Systematic Withdrawal Plan (SWP) you’ve initiated gets temporarily paused or cancelled.
