What is Loan Against Mutual Funds? Get up to Rs 9.5 lakh loan on fund worth Rs 10 lakh - Details

The complex processes, rigorous documentation, and late disbursals pose challenges in creating an inclusive lending system, leading to major financial delays. Against this backdrop, wherein borrowers have been unable to find the right financial solution, Loans Against Mutual Funds (LAMFs) have emerged as an invaluable tool, bridging the gap between limited access and traditional procedures. 

What is Loan Against Mutual Funds?

Loan Against Mutual Funds or LAMFs offer borrowers immediate access to funds without having to liquidate their investments, contributing to the development of an inclusive lending ecosystem. By using the current value of the mutual funds and considering the investment duration, one can secure a loan. Loans against mutual fund units and shares offer economic benefits and more repayment flexibility compared to other borrowing options, making them an attractive choice for various financial needs. With Loan Against Mutual Fund (LAMF) gaining popularity, individuals seeking quick and flexible financing can rely on this method without having to sell their mutual fund investments.

According to Atul Garg, Founder, FinEzzy, LAMFs allow borrowers to access financial assistance without having to sacrifice their long-term goals for short-term needs.

"Simultaneously, this enables a track record of financial responsibility which will serve them well in the future. With investments continuing to grow, while meeting financial demands, LAMFs empower borrowers to tap into the market of strategic borrowing,” Garg added.

How much loan can one avail of?

According to Atul Garg, the limit of loans depends on the amount in holdings and the type of funds they hold. "Usually, the loan-to-value or LTV is between 50 per cent to 95 cent. It's higher for debt funds and lower for equity funds. The minimum and maximum amount that can be disbursed is Rs 2,000 and 25,00,000 for FinEzzy. It can vary on other platforms," Garg said.

For example, if a person holds funds worth Rs 10 lakh he can avail loans up to Rs 9.5 lakh. 

Personal Finance and Investment Management

Within the current framework, strategic borrowing is an avenue to meet immediate personal finances without having long-term repercussions on the future, by being able to repay the loan seamlessly. With LAMFs, borrowers get to meet their immediate cash needs and still keep their eye on the prize of long-term investment growth; as funds keep growing while getting the cash needed now. Additionally, the adjustable repayment terms present an opportunity to achieve the balance between present finance and investment continuity. 

Ultimate Safety Net 

“Rooted in the simple concept, wherein borrowers take a loan against the value of their mutual funds rather than selling them, LAMFs act as a safety net, allowing borrowers to navigate the unexpected twists of life with confidence, knowing that they won’t have to sacrifice their future financial growth”, Atul added. At the same time, low-interest rates and flexible repayment terms ensure that borrowers are not stuck with rigid terms or conditions, which acts as the ultimate safety guarantee on all fronts. 

Catalyst to Achieve Long-Term Goals 

For long, conventional loans have been the backbone of dreams, helping individuals turn their goals into reality. However, their stringent processing made them obsolete to borrowers with zero credit history, forcing them to let go of their dreams. Apart from being recognised as a loan option, it's an opportunity to balance current financial needs with future goals. With no more compromises and cash shortage, it lays a straight path towards realising those great goals.

With borrowers striving to embark on a journey of strategic borrowing, there is only one better financial avenue in the market, except LAMFs. To secure the future strategically, and address the financial emergencies of the present, LAMFs are truly the epitome of augmented wealth creation and a safe and secure future.