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What are Loans Against Mutual Funds?
Loans against mutual funds have become a popular option for people who need quick access to funds without having to sell their mutual fund investments. This type of loan allows you to borrow money against the value of your mutual fund units. In this blog, we will discuss everything you need to know about loans against mutual funds, including the benefits and the process.
Loans against mutual funds are a type of loan where you can borrow money against the value of your mutual fund units. This means that you don’t have to sell your mutual fund investments to get access to funds. Instead, you can keep your investments intact while using them as collateral for the loan.
Benefits of Loans Against Mutual Funds
There are several benefits of taking a loan against your mutual funds. Here are some of the main advantages:
- Quick access to funds:
Loans against mutual funds provide quick access to funds without having to sell your mutual fund investments. This makes it an ideal option for those who need funds urgently.
- Low interest rates:
Loans against mutual funds usually come with lower interest rates compared to other types of loans, such as personal loans or credit card loans.
- No impact on credit score:
Since loans against mutual funds are secured loans, they do not have any impact on your credit score.
- Flexible repayment options:
Loans against mutual funds offer flexible repayment options, allowing you to repay the loan as per your convenience.
How to Get a Loan Against Mutual Funds?
The process of getting a loan against mutual funds is simple and hassle-free. Here are the steps involved:
- Check your mutual fund eligibility: Different lending companies have different eligibility criteria for loans against mutual funds. You need to fetch your mutual funds portfolio to check your eligibility.
- Apply for the loan: Once you have confirmed your eligibility, you can proceed further by pledging the portfolio and complete KYC process
- Get the loan disbursed: After the verification of your documents, the loan amount will be disbursed directly to your bank account.
The maximum amount that you can get as a loan against mutual funds depends on the value of your mutual fund units. Different mutual fund companies have different loan to value (LTV) ratios, which determine the maximum loan amount that you can get.
If you are unable to repay the loan, the mutual fund company will sell your units to recover the loan amount.
Yes, you can continue to invest in mutual funds even if you have taken a loan against them. However, you need to make sure that you have sufficient units to cover the loan amount.
Loans against mutual funds are a convenient and easy way to meet your financial needs without having to sell your mutual fund investments. They offer several benefits, including quick access to funds, low interest rates, and flexible repayment options. If you are considering taking a loan against your mutual funds, make sure you fulfil the eligibility criteria. Download the 50Fin app now.
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