Smart Way to Get Instant Loan Against Mutual Funds

If you’re in need of quick cash but don’t want to liquidate your investments, learning how to get loan against mutual funds can be a game changer. This financial option allows you to raise funds by pledging your mutual fund holdings without redeeming them. It’s fast, simple, and cost-effective.

Let’s explore how to take loan against mutual funds in the most practical way.

What is a Loan Against Mutual Funds?

A loan against mutual funds is a type of secured loan where your mutual fund units are pledged to a lender (usually a bank or NBFC) in exchange for money. The value of the loan depends on the Net Asset Value (NAV) of your mutual funds and the lender’s margin requirement.

Key Benefits of Taking Loan Against Mutual Funds

• No need to redeem your investment
  
  

• Lower interest rates compared to personal loans
  
  

• Quick processing (usually online and within 24-48 hours)
  
  

• Continued returns on mutual fund units during the loan period

How to Get Loan Against Mutual Funds: Step-by-Step Guide

Here's a simple guide to help you understand how to take loan against mutual fund:

1. Check Eligibility

Ensure your mutual funds are eligible. Most lenders accept:

• Equity mutual funds
  
  

• Debt mutual funds
  
  

• Hybrid funds
  
  

Note: ELSS funds are generally not accepted due to the 3-year lock-in period.

2. Choose the Right Lender

Compare banks and NBFCs for:

• Interest rates (generally between 9%–13%)
  
  

• Loan-to-value ratio (up to 50-70% for equity funds, 80-90% for debt funds)
  
  

• Processing fees and terms
  
  

3. Apply Online or Offline

Most lenders offer a fully digital process. You’ll need:

• PAN & Aadhaar
  
  

• Mutual fund folio details
  
  

• Bank account details
  
  

Lenders may use platforms like NSDL or CAMS to verify and hold your units as collateral.

4. Sign the Agreement

After approval, sign the loan agreement digitally or physically. Your mutual fund units will be “lien-marked” in favor of the lender.

5. Receive the Funds

The sanctioned amount will be disbursed directly to your bank account often within 24 hours.

Things to Keep in Mind

• You cannot redeem pledged online mutual funds until the loan is cleared.
  
  

• If NAV falls drastically, the lender may ask for additional units or repayment.
  
  

• Prepayment or foreclosure may come with minimal charges (or none).

Conclusion

Understanding how to get loan against mutual funds helps you access funds without breaking your long-term investment plan. Whether it’s for a personal emergency or business need, it’s a smart way to unlock liquidity. Before proceeding, compare options and read the fine print to make the most of this powerful financial tool.