1. Lower interest rates: The loan against mutual funds has lower interest rates compared to an unsecured loan. This is because it is a secured loan and provided when pledged against collaterals. Therefore, this loan has a lower rate of interest as well.
2. No specific purpose: The loan against mutual funds can be acquired for any purpose – just like a personal loan. The lenders won’t ask you the purpose of the loan for approval. It means you can make use of the acquired loan amount for purchasing a new house or just to pay your old debt or any medical emergency funding.
3. No Pre-payment charges: The loan against mutual funds has a low tenure for repayment. Therefore, the lenders don’t charge applicants with any pre-payment amount.
1. Loan to value: The major disadvantage of loan against mutual funds is that the lender offers you a lower amount than your actual stock value. The lender will provide only 60-80% of the amount of the collateral.
2. List of companies: The lenders pay close attention to the company’s name in the lenders' list. If a company name is not in a lenders list, the loan will be rejected.
3. Selling of stocks: When your loan is approved, you will partially lose authority from selling your mutual funds. You can gain the full authority of your stocks only after repaying the loan amount.