Last Updated on Feb 14, 2025 by Ayushi Gangwar
Q: What is the monthly instalment on a ₹1 lakh loan against mutual funds (LAMF)?
In LAMF, borrowers pay only the monthly interest on the loan amount. For a ₹1 lakh loan, the annual interest rate is 10.5%, which results in a monthly interest payment of ₹875. This is lower than traditional loans, where both interest and principal are paid monthly.
Monthly payments for different loan amounts
Loan amount | Interest rate | Monthly installment |
Rs. 25,000 | 10.5% | Rs. 219 |
Rs. 50,000 | 10.5% | Rs. 437 |
Rs. 75,000 | 10.5% | Rs. 656 |
Rs. 1,00,000 | 10.5% | Rs. 875 |
Note: For illustration purposes only. The borrower also has to repay the principal amount within the 3 years, which is not a part of monthly payments.
Q: Does the monthly payment include the principal amount?
No, the monthly payments cover only the interest. The principal repayment can be done at any time within the 3-year tenure.
Q: Can I make partial principal repayments?
Yes, you have the flexibility to make partial principal repayments during the 3-year period. Each principal repayment reduces the interest obligation. For example, if you have taken a loan against mutual funds for Rs. 1 lakh in January and you repay Rs. 50,000 in February, your outstanding principal drops to Rs. 50,000, and from the next month onward, your monthly interest payment is halved to ~Rs. 241. You can consistently reduce the principal amount at any point, thereby lowering your monthly payments.
Q: Are there prepayment charges?
No, there are no prepayment charges or foreclosure charges for early repayments of the principal amount.
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