Loan Against Mutual Funds & Securities – A Smart Way to Unlock Liquidity
Dinesh Kotadiya
"Empowering Financial Growth | Insurance, Loans & Mutual Funds Advisor | Simplifying Finance for Smarter Decisions"
Need urgent funds but don’t want to sell your investments? A Loan Against Mutual Funds (LAMF) or Loan Against Securities (LAS) is a smart way to access liquidity without liquidating your assets. Offered by banks and NBFCs, this loan allows you to pledge your mutual funds, shares, or other securities as collateral while continuing to earn returns on them.
In this article, we will explore how a Loan Against Mutual Funds & Securities works, its benefits, eligibility, and why it’s a great financial tool for investors.
What is a Loan Against Mutual Funds & Securities?
A Loan Against Mutual Funds (LAMF) or Securities (LAS) is a secured loan where you pledge your mutual fund units, shares, bonds, or other financial assets as collateral to get a credit line or lump sum amount.
Unlike a personal loan, this loan offers lower interest rates since it is backed by securities. The loan amount is determined by the value of your pledged securities, and you continue to hold ownership of your investments.
? Example: Suppose you have ?10 lakhs worth of mutual funds. Depending on the lender’s margin requirements, you can get up to ?5-7 lakhs as a loan while your funds remain invested.
Key Features of Loan Against Mutual Funds & Securities
?? Loan Amount – The amount you can borrow depends on the type and value of securities pledged. Generally, you can get:
- Up to 50-70% of equity mutual fund value
- Up to 80-90% of debt mutual fund value
- Up to 50-80% for shares, bonds & other securities
?? Flexible Repayment – You can repay the loan as per your convenience, either through EMIs or lump sum payments.
?? No Need to Sell Investments – Your mutual funds, stocks, or bonds remain invested, allowing you to continue earning potential returns.
?? Interest is Charged Only on the Used Amount – If you opt for an overdraft facility, interest is charged only on the withdrawn amount, not on the entire sanctioned loan.
?? Lower Interest Rates than Personal Loans – Since this is a secured loan, the interest rates are lower, typically ranging from 9-12% per annum, compared to personal loans (12-24%).
Benefits of Taking a Loan Against Mutual Funds & Securities
? Quick Access to Funds – No need for long documentation or credit checks; loans are processed faster.
? No Need to Liquidate Investments – You continue to earn dividends, interest, and capital appreciation on your securities.
? Better than Personal Loans & Credit Cards – Interest rates are much lower compared to unsecured loans.
? Flexible Withdrawal & Repayment – Choose overdraft or term loan based on your financial needs.
? No Prepayment Penalties – Most lenders don’t charge foreclosure fees, allowing early repayment without extra cost.
Eligibility Criteria for Loan Against Mutual Funds & Securities
The eligibility criteria may vary by lender, but generally include:
?? Age: 18+ years
?? Resident Type: Indian Resident or NRI (depending on lender)
?? Securities: Only approved mutual funds, stocks, or bonds are accepted as collateral
?? Loan Amount: Minimum ?50,000, Maximum varies by lender
?? Demat Account: The securities should be in Demat form (for shares and bonds)
Documents Required
To avail of a Loan Against Mutual Funds or Securities, you need minimal documentation:
?? KYC Documents – PAN Card, Aadhaar Card, Passport/Voter ID
?? No Income Proof - NO CIBIL
?? Mutual Fund/Shareholding Statement – Proof of securities being pledged
?? Loan Application Form – Duly filled and signed
How to Apply for a Loan Against Mutual Funds & Securities?
You can apply for the loan through:
2?? Online Loan Platforms – Many fintech platforms provide digital loan approval with instant disbursement.
3?? Stockbrokers – Some brokers offer margin loans against stocks.
Application Process
? Step 1: Choose a lender and check eligible securities. Check here
? Step 2: Submit an online/offline loan application with required documents.
? Step 3: The lender verifies your securities and approves the loan.
? Step 4: The amount is disbursed, and a lien (pledge) is marked on the securities.
? Step 5: Once the loan is repaid, the lien is removed, and ownership remains intact.
Things to Consider Before Taking a Loan Against Mutual Funds & Securities
? Loan-To-Value (LTV) Ratio – Different lenders offer different LTVs. Equity funds/stocks have lower LTV due to volatility, while debt funds have higher LTV.
? Market Risks – If your pledged securities lose value, the lender may ask for additional collateral or partial repayment.
? Interest Costs – While lower than personal loans, compare interest rates across lenders to get the best deal.
? Prepayment & Processing Charges – Some lenders charge fees for loan processing or early repayment.
Conclusion – Is Loan Against Mutual Funds & Securities a Good Option?
A Loan Against Mutual Funds & Securities is a great way to access quick liquidity without disrupting long-term investments. It is an excellent alternative to personal loans and credit cards, offering lower interest rates and flexible repayment options.
?? Who Should Consider This Loan?
? Investors who need urgent funds without selling assets
? Business owners looking for short-term capital
? Individuals seeking lower-cost borrowing options
If you need funds and have investments in mutual funds, stocks, or bonds, this can be a cost-effective financial tool for you! ????
Need a Loan Against Mutual Funds & Securities?
?? Apply now with MAFS & unlock funds instantly! ??
Would you like a detailed comparison of lenders or assistance with the application process? ??