Last Updated on Dec 20, 2024 by Ayushi Gangwar
In today’s fast-paced world, financial needs often arise unexpectedly, demanding immediate attention and quick access to funds. While traditional options like personal loans or redeeming investments are viable solutions, they can have drawbacks for some borrowers. We wanted to solve this exact problem, and that is how we came up with our latest offering – Loan Against Mutual Funds. While you connect your Mutual Funds and track them in your portfolio, you can make the best of your MF investments.
With LAMF, we aim to empower investors with a financial tool that ensures they stay on track with investment plans while conveniently accessing the required funds. Let us begin by understanding what is loan against mutual funds and personal loans.
Table of Contents
Understanding Loan Against Mutual Funds
Unlike a personal loan, where you get a loan based on your credit history and income, LAMF leverages your existing mutual fund investments as collateral. With LAMF, you can unlock the value of your investments without the need to liquidate them, enabling you to maintain your long-term investment strategies intact.
Benefits of Loans Against Mutual Funds
Loan Against Mutual Funds (LAMF) offers a range of critical features that make it an attractive and compelling option for borrowers in need of short-term liquidity. Key features of loan against mutual funds (LAMF) such as documents & eligibility are given in the table below –
| Key Features | Loans Against Mutual Funds | |
| Interest Rates | Lower interest rates at just 10.75% pa | |
| Credit Score | Credit score is not a factor | |
| Documentation Requirements | Verification occurs online; no documents are required in most cases | |
| Loan Amount Flexibility | Based on mutual fund value | |
| Loan Repayment Flexibility | Pay only interest each month; the principal can be repaid anytime | |
| Prepayment Charges | Available at NO extra charges |
Why is taking a LAMF better than exiting investments?
The importance of investment continuity cannot be overstated when it comes to long-term wealth building. Redeeming investments to meet short-term financial needs can lead to significant opportunity costs, as it may impede the potential returns that could have been earned had the investments been left untouched. Here is where a loan against mutual funds vs personal loans, proves to be a prudent choice.
With LAMF, borrowers can access the required liquidity without disturbing their well-thought-out investment strategies. By leveraging their mutual fund investments as collateral, they can unlock the necessary funds while maintaining their long-term financial goals intact, ultimately enhancing their overall financial well-being.
For more such queries related to loans against mutual funds and shares click here.
What can LAMF be used for?
When it comes to leveraging LAMF, there are several scenarios where this financial tool can prove to be a game-changer, offering investors much-needed financial flexibility without compromising their long-term investment objectives.
Financial Emergency Needs
LAMF can play a pivotal role in catering to unforeseen expenses without the need to sell existing investments during crises. This strategic approach allows individuals to face emergencies with confidence, knowing that their investment portfolio remains intact, and they can continue working towards their financial goals.
Funding Short-Term Goals
Whether it’s fulfilling a dream vacation, funding higher education, or renovating a home, short-term goals often require significant financial resources. Instead of disrupting their investment portfolio or burdening themselves with high-interest personal loans, investors can turn to LAMF for financing these aspirations\ without sacrificing their long-term financial plans.
Debt Consolidation
Dealing with multiple high-interest debts can be overwhelming and financially draining. LAMF provides an efficient solution for borrowers seeking to consolidate their debts and manage their finances more effectively. By availing a loan against equities or their mutual funds, borrowers can pay off high-interest debts and consolidate them into a single, more manageable loan.
Downpayment on Big-ticket Purchases
Making big-ticket purchases like cars or homes can seem financially daunting even with the aid of specific loans. Even with loans, the initial expenditures aren’t covered and you often end up paying considerable amounts out of your pocket while trying to work out regular expenditures. In such cases, LAMF can prove to be very beneficial for investors. Getting a loan against your investments while still reaping returns sounds like an ideal scenario for investors. No need to exit investments to fund these purchases or put them on hold anymore – simply leverage your mutual funds to get a loan at an ultra-low interest rate with LAMF.
How to avail LAMF at Tickertape?
Unlock a loan against your MFs online with Tickertape in these simple steps:
- Login on the Tickertape app
- Connect your Mutual Funds holding on the Portfolio tab
- Go to the More tab, click on Loan Against Mutual Funds
- Check your MF credit limit
- If logged in on smallcase, pledge the holdings depending on the loan amount
- Sign the loan agreement
- Get cash in your bank account within 2 working hours
Seamlessly resume from where you left off. Remember, pledged MFs can’t be sold. The monthly interest is auto-debited. Timely payments are crucial to avoid extra charges.
To Wrap It Up…
The benefits of LAMF as a credit line shines brightly in comparison to personal loans. With LAMF, borrowers gain access to funds at lower interest rates, ensuring significant interest savings over time. Additionally, investors can enjoy the lowest EMI on loan against mutual funds!
By leveraging mutual fund investments without liquidating them, borrowers can continue to reap the rewards of compounding and potential market growth, bolstering their long-term wealth-building prospects. By using LAMF as a credit line, investors can achieve short-term financial goals while preserving and nurturing their investments for a brighter, more prosperous financial future.
FAQs
1. Is it safe to take a loan against mutual funds vs personal loans?
Absolutely. Banks and Non-Banking Financial Companies (NBFCs) can provide you with a loan using your Mutual Fund holdings as collateral. This is similar to pledging other assets like gold and real estate.
2. Which bank provides digital loans against mutual funds vs personal loans?
Several banks and financial institutions offer digital loans against mutual funds. Some prominent banks and NBFCs in India that provide this service include HDFC Bank, ICICI Bank, Axis Bank, Bajaj Finserv, Kotak Mahindra Bank, and Indiabulls among others.
3. Can I withdraw a loan against mutual funds with lock-in periods?
Tax-saving funds have a lock-in period of 3 years. Such locked-in units cannot be used as collateral.
4. What is the difference between a loan against FDs vs a loan against mutual funds?
Opt for lower-risk, lower-interest loans against FDs, or consider higher-risk, higher-interest loans against Mutual Funds. FDs maintain liquidity, while mutual fund units are locked, affecting liquidity. Choose based on your risk appetite and liquidity needs while leveraging your investments.
For more information on Loan Against Securities & Loan Against Mutual Funds;
Check smallcase for more information on offers of quick and easy disbursement of loans against securities ( LAMF), all about eligibility, documents, features and benefits of Loan against mutual funds and the process for applying for a Loan is just one click away –
- Is LAMF a better alternative than breaking investments? - Dec 20, 2024
- Loans Against Mutual Funds: A New Offering from Tickertape! - Dec 20, 2024
- Understanding monthly instalments on LAMF in 1 minute - Dec 20, 2024
