Selling investments during a financial emergency may not always be the best decision, especially if your mutual funds are performing well. Instead of redeeming your investments, you can opt for a loan against mutual funds in India, which allows you to pledge your mutual fund units and receive funds quickly. This secured borrowing option provides liquidity while keeping your long-term investment strategy intact.
What is a Loan Against Mutual Funds?
Instead of selling the mutual fund units, the lender places a lien on the pledged units until the loan is fully repaid. During this period, the borrower retains ownership of the investment while accessing funds for financial needs.
This makes a loan against MF investments a convenient option for individuals who need quick liquidity but want to keep their investments intact.
How Loan Against Mutual Funds Works?
Pledge Mutual Fund Units
Loan-to-Value (LTV) Ratio Applied
Loan Amount Disbursed
Interest Payment and Repayment
Lien Removal After Repayment
Key Features of Loan Against Mutual Funds
Continue Investment Growth
Access Quick Liquidity
Lower Interest Rates
Flexible Borrowing Options
No Immediate Capital Gains Tax
Benefits of Loan Against Mutual Funds vs Personal Loans
| Benefit | Loan Against Mutual Funds | Personal Loan |
|---|---|---|
| Interest Rate | Usually lower due to secured collateral | Higher due to unsecured nature |
| Investment Ownership | Mutual funds remain invested | No investment involvement |
| Capital Gains Tax | Not triggered immediately | Not applicable |
| Approval Process | Faster due to collateral | May require detailed verification |
| Interest Payment | Often charged only on utilized amount | Charged on full loan amount |
Example Scenario: Loan Against Mutual Funds
| Parameter | Details |
|---|---|
| Mutual Fund Portfolio Value | ₹2,00,000 |
| LTV Ratio | 60% |
| Loan Amount Approved | ₹1,20,000 |
| Interest Rate | 9% per year |
| Tenure | 1 year |
Outcome
Borrower receives ₹1,20,000 in funds while retaining mutual fund ownership.
After one year, the borrower repays principal plus interest (~₹1,30,800).
Once repayment is completed, the pledged mutual fund units are released.
Loan Against Mutual Funds Eligibility
| Criteria | Details |
|---|---|
| Investor Type | Individual mutual fund investor |
| Mutual Fund Holdings | Eligible mutual fund schemes |
| KYC Compliance | PAN and Aadhaar verification |
| Minimum Investment Value | As per lender requirements |
| Credit Profile | Basic credit assessment may be required |
How to Apply for a Loan Against Mutual Funds?
Choose a Trusted Lender
Download the Capital Now App
Submit Basic Details
Pledge Mutual Fund Units
Loan Approval and Valuation
Loan Disbursal
Repayment and Release of Units
Important Things to Consider Before Applying
Compare interest rates from multiple lenders.
Check the Loan-to-Value ratio offered.
Understand repayment terms and tenure.
Monitor mutual fund performance to avoid margin calls.
Review processing fees and other charges.
Why Choose Capital Now?
Fast digital application process
Transparent loan terms and charges
Flexible repayment options
Secure online verification
Quick loan approval for eligible applicants
Need Funds Without Selling Your Investments?
Apply through Capital Now and access quick funds while maintaining your long-term investment strategy.
Conclusion
Understanding how loan against mutual funds works, evaluating eligibility criteria, and comparing lenders can help borrowers make informed decisions. With digital lending platforms like Capital Now, applying for a loan against mutual fund units has become faster, simpler, and more accessible than ever.
Frequently Asked Questions
Ready to Take Control of Your Finances?
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