Loan Against Mutual Funds

A Loan Against Mutual Funds is a secured loan where the investor pledges their mutual fund units (equity or debt) as collateral to get instant liquidity from a partner bank or NBFC.

In today’s fast-moving financial world, liquidity needs can arise anytime—whether it’s a medical emergency, home renovation, business cash flow, or a short-term expense. While most people consider personal loans or gold loans as the first option, an increasingly popular and smarter alternative is Loan Against Mutual Funds (LAMF).

For investors who already hold a mutual fund portfolio, LAMF offers quick access to funds without redeeming investments, ensuring that long-term wealth creation goals remain intact.

Loan Against MF is ideal for:

• Short-term cash requirements
• Business working capital
• Medical or urgent needs
• Avoiding premature redemption
• Situations where loan interest < MF returns

LAMF is not ideal for extremely long-term or high-risk pledging without sufficient repayment capacity.

Eligibility Criteria for LAMF

Typical eligibility includes:

• Indian resident
• KYC-compliant mutual fund folios
• Mutual funds under the approved list of lenders
• Minimum portfolio value (varies by lender)

Both equity and debt mutual funds can be pledged, with different LTV ratios

Loan-to-Value (LTV) Ratios

While exact values differ across lenders:

• Equity Mutual Funds: 40–50% of portfolio value
• Debt Mutual Funds: 70–80% of portfolio value

Example: If you hold ₹10 lakh in equity mutual funds, the eligible loan amount would be approximately ₹4–5 lakh.