Features and Benefits of a Digital Loan Against Mutual Funds
In today’s economic world, financial needs can arise unexpectedly, demanding quick access to funds. While opting for personal loans or breaking your investments might seem viable options, these can interrupt your long-term wealth-creation process. Addressing this issue, we at smallcase have introduced Loan Against Mutual Funds (LAMF), a type of Loan Against Security (LAS) that allows you to borrow against your mutual fund holdings at a lower interest rate.
In this blog, you will learn about the application process, features, and benefits of taking a loan against mutual funds with smallcase. Let’s begin.
What is a Digital Loan Against Mutual Funds?
Loan Against Mutual Funds (LAMF) is a type of Loan Against Security (LAS) where you can use your mutual fund investments as collateral to borrow money. These mutual funds are registered with Computer Age Management Services Limited (CAMS). Unlike traditional personal loans, where you approach a lender based on credit history and income, LAMF helps you access funds without breaking your investments.
At smallcase, you can easily avail a loan against mutual funds from the comfort of your home as it is completely digital. The best part of opting for LAMF via smallcase is that it is available to all users at a competitive interest rate of just 10.75% per annum. You can learn more about the Loan Against Mutual Funds (LAMF) from our learn article.
Thus, the competitive interest rate, flexibility in fund types, and paperless process make it an attractive option for investors looking to meet their financial needs without selling their mutual fund units.
How to Apply for a Loan Against Mutual Funds via smallcase?
If you’re thinking, ‘How can I get a loan against mutual funds?’ here is a step-by-step guide that can help you get LAMF via smallcase in just 5 minutes:
- Visit the smallcase app and log in with your credentials.
- Click on the ‘More’ tab and select Loan Against Mutual Funds. If you’re wondering who can apply for LAMF, read our article on Eligibility and Documents to get a better understanding.
- Import your MF holdings and select the funds you want to use as collateral.
- Add a bank account to receive funds and set up a mandate for monthly interest auto-debit.
- At last, sign the loan agreement and get funds credited to your bank account in just 2 working hours. Yes, it’s that quick.
What are the Loan Against Mutual Funds Salient Features?
By availing a loan against mutual funds (LAMF) via smallcase, you can now protect yourself from any unforeseen occurrences by taking out loan funds secured by your assets. Here are some of its features:
- Instant Access to Credit: Life is unpredictable, and so are your financial expenses. Therefore, with a predetermined limit based on the fund type (i.e. debt and equity funds), you can avail the loan up to 45% for equity MFs and 75% for debt MFs. It offers immediate liquidity against the mutual fund units you own.
- Lower Interest Rates: Availing a loan against mutual funds has never been this easy. You can easily avail a loan against mutual funds with an interest rate of 10.75% per annum, which is lower than personal loans and credit cards.
- Loan Tenure: The default loan tenure for loans against mutual funds is 36 months. However, if you wish to close your loan earlier, you can do so without any foreclosure charges at smallcase.
- Lower Monthly Payments: By applying for a loan against mutual funds, you only need to pay interest every month on the borrowed amount. For example, if you borrow Rs. 1 lakh, you only need to pay Rs. 875 every month at an interest rate of 10.75% per annum, with a complete flexibility to repay the principal any time before the loan tenure ends.
- Zero Foreclosure Charges: You can make a payment towards your outstanding mutual fund loan amount anytime with zero foreclosure charges with smallcase.
- Flexible Repayment: The repayment terms are quite flexible if you opt for a loan against mutual funds via smallcase. Choose to pay the principal amount anytime within the repayment period.
What are the Benefits of Loan Against Mutual Funds?
LAMF may offer several benefits to individuals who are looking to meet their financial needs without selling their mutual fund investment. Here are some of the potential advantages:
- Get LAMF Within Hours: Applying for a loan and waiting days for approval can be a frustrating experience. However, at smallcase, if you meet the eligibility criteria and have sufficient fund holdings, the entire process from application to disbursement will be completed in 2 working hours.
- 100% Digital Process: Now, you don’t have to visit banks or contact relationship managers. At smallcase, you can quickly complete your entire journey of availing a loan against mutual funds in just a few clicks on your mobile app.
- Wide range of Mutual Fund Schemes: From a list of 6000+ mutual fund schemes, you can see how much loan you can take against your funds.
- Select from a List of Approved Securities: Mutual fund companies work with CAMS & KFin (earlier known as KARVY) as their Registrars and Transfer Agents (RTAs). These RTAs mark liens against funds held in non-demat form only, based on which you can opt for a loan.
- Retain Ownership: By pledging the funds as collateral, you can access immediate funds while continuing to benefit from investment returns. This means you can keep investing and earning returns/dividends but won’t be able to sell/redeem your mutual funds.
To Wrap It Up…
To conclude, Loan Against Mutual Funds (LAMF) empowers investors with a financial tool that ensures easy access to funds without liquidating their existing investments. Thus, with a wide range of features and benefits, you can opt for LAMF on smallcase to access funds at lower interest rates. So, analyse and apply quicker than before by opting for a loan against mutual funds at smallcase today!
Frequently Asked Questions on Loan Against Mutual Funds Benefits
To obtain a loan, you can only pledge funds held in non-demat form, specifically those held in the Statement of Accounts (SoA) or physical form. Moreover, your pledged funds must also be included in the lender’s list of eligible mutual funds.
You can provide shares as collateral, either from your own holdings or from eligible family members (parents, spouse, children, and siblings over 18 years old and share the same blood relation as you).
smallcase allows you to avail a loan against mutual funds ranging from Rs. 25,000 to Rs. 5,00,00,000. It is determined by the value of the mutual funds you use as collateral.
When you need funds, LAMF can be a convenient and flexible solution. Unlike some loans that require property, a steady income, or a good credit score, a loan against mutual funds uses your existing fund holdings as collateral. Additionally, you only pay a monthly interest on the borrowed amount rather than the entire loan amount.
After you take the loan, the lender will pledge your funds as collateral. This means you can continue to invest and earn returns/dividends while maintaining ownership of your mutual fund units. However, it’s important to note you might not be able to sell or redeem them until the loan is fully repaid.
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 –
