Loan Against Mutual Fund – All You Need to Know

Before taking a loan it is important to stay aware of what your lending options can be. Where people know about some famous and common lending options such as Personal Loans, Home loans, Car loans, Business loans, etc. very few know about some less-known yet high-yielding lending options such as Loans Against Mutual Funds. Loan against mutual funds would not be a new concept for many, but there are people who may find it a new term. There is a lot of concern in the market about funds being liquid, but there can be certain aspects of funds that are not as liquid as you think they are. Loans against mutual funds can be a great way to raise instant cash. No, it’s not an incredibly easy process, and yes, you’ll need to work with your financial institution and your brokerage firm in order to make this happen. But if you’re in a pinch, it might not be a bad idea to consider taking out a loan against your investments. So if you are all out and about for the concept of Loan against Mutual Funds, then let us introduce you to all the general information of the concept so you could make a sound and informed decision. 

What is Loan Against Mutual Funds? 

You have mutual funds in your account. You are earning some return. But you need money today to start a business or buy a house. You can pledge your mutual fund investment to a bank against a short-term loan. This is known as a “Loan Against Mutual Fund“. Your invested money will not be touched and you will continue to enjoy the regular returns on your investments.

How Does a Loan Against Mutual Funds Work?

A loan against a mutual fund is available for investors who cannot redeem their mutual fund due to a cash crunch. Investors are able to take a loan and make the redemption at the earliest. The asset is used as collateral for the loan, so it is a secured one, which assures you will not lose the investment. When you apply for a loan against mutual fund units, you have many options as to how you use the money. Use it for any fixed asset purchases, for buying a vehicle, or even to fund your daughter’s trip to the US for higher studies.

What are the Advantages of a Loan Against Mutual Funds?

Instant Liquidity: Have you ever wished to have a little more money in your hands immediately? You are not alone. Most people wish for an additional amount of cash in their bank accounts frequently. With loans against mutual funds, you can get that instant liquidity to help you with unexpected expenses or urgent cash needs.

Short-Term Finance: Short-term financing often refers to funds that a person or entity borrows for a duration that is less than one year. Loan against a mutual fund offers many benefits; the most important benefit being financial flexibility. This loan can be used to raise capital quickly for short-term financial requirements or medical emergencies.

Reliable Source: Nowadays, a loan against mutual funds is one of the most versatile means to raise capital fast. Investors, equity investors, and those looking for senior loans for business can benefit from the excellent nature of this type of loan. The reliability of mutual funds along with the fact that they are easily converted into cash makes them a reliable source of finance in a number of cases.

No Need to Sell Your Funds: Although a little complex in terms of its process, a loan against mutual funds is one of the easiest ways to get cash without compromising on your investments. With no risk attached to it, a loan against your mutual funds could be just the ticket you need to tide through an imminent financial crunch.

Low-Interest Rates: One of the reasons why many people borrow from a mutual fund is that it can be done with relative ease than going through several formalities like credit checks, loan application processes, and the like. Borrowing money with a lower interest rate is one important benefit of getting a loan against mutual funds.

Eligibility for Loans Against Mutual Funds

• Minors applicants are not eligible for loans against property
• Individuals, non-resident Indians, firms, trusts, and companies can all borrow against their mutual fund investments. 
• Banks and other financing institutions determine the quantum of a loan, its tenure, and interest rate based on factors such as the credit score of the applicant.
• A good credit score can help you get a lower interest rate on your loan.                                              

How to Get a Loan Against Mutual Funds?

Loans against mutual funds can be taken from private financial institutions that offer this facility. These loans are at much lower interest rates than bank loans and also do not require pledging of collateral. The borrower, as is the case with other financial products, needs to submit some documents to the lender for processing. This document is the most important piece of the puzzle because it is used to calculate the amount of loan based on the value of your mutual fund units.

Many online portals offer quick disbursal of loans if you hold units in the Demat form, with prior permission. If you own physical units, then you should have an agreement with the lender/bank. The lender asks the mutual fund registrar (like CAMS or Karvy) to mark a lien on the number of units being pledged. The registrar marks the lien and sends a letter to the lender with a copy to you confirming the lien. An important thing to remember is that the lien is marked against the units; you cannot redeem these units before repaying your loan in full.

How Can you Apply Loan Against Mutual Funds with Referloan ?

With Referloan, Applying Loan against mutual funds is never been so easier. Just follow steps given below:-
Step 1: Visit this link Loan Against Mutual fund
Step 2: Please fill all the necessary details .
Step 3 : Now just sit back and relax. Once approved you will get Loan against your Pledges mutual funds.