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Loan Against Mutual Funds - A Quick Look at the Product

Loan against mutual funds, like any other mortgage-based credit scheme, allows people to borrow a loan by pledging their asset as security. In case of a regular mortgage, the asset is most likely a residential property such as a residential apartment, a plot initially purchased for constructing a home on it, or any other type of residential or commercial real estate property.

But, in case of a loan against mutual funds the asset is more likely, as the name suggests, is a mutual funds bond. Yes! You can actually pledge your mutual funds maturity agreement i.e. the bond as collateral and avail a loan against it. The borrowing limit would be decided on factors such as (1) type of mutual fund, (2) the average rate of return, (3) maturity value.

loan against mutual funds

To give you a gist, the borrowing limit can be somewhere around 60-70% of the asset’s maturity value. However, again, that’s based on the lenders' policy. They can offer a smaller percentage as a loan or vice versa. This is what you can find out while applying actually. But, what you must know is the benefits of taking a loan against your mutual funds:-

  • You don’t lose your investment - the maturity value remains intact and you also get a relationship officer who would answer all your queries during working hours.
  • Once you repay the debt, you get back your mutual fund bond as it is.
  • And it improves your CIBIL score apart from getting you the required finance at a lower rate.

Just remember, every lender offering this facility has certain guidelines which it would expect every applicant to fulfil. You must check these eligibility conditions in advance.

To know more about the loan against mutual funds, click here: Loan on Mutual Funds – A Quick Introduction!

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