FAQs: Applying for Loan Against Mutual Funds on smallcase

Pledging Mutual Funds

1. What happens when I pledge mutual funds?

• The mutual funds are lien marked in the favour of the lender i.e. that they are kept as collateral with the lender.
• Once the mutual funds are pledged, you cannot exit or sell such holdings until you close the loan but you can continue your regular investments.

2. When will my funds be unpledged?

• Once you repay any outstanding dues and close the loan, your mutual funds will be unpledged.

Loan Amount Confirmation

1. Why is my calculated credit limit different from earlier?

• The loan amount you might be eligible for may be lower than your previous credit limit if your mutual funds are:
  • Blacklisted by the lender/AMC
  • Currently pledged
  • In demat account
  • ELSS funds under a 3-year lock-in

2. The units of some of my mutual funds are less than my actual holdings. Why?

• This can happen when some of your MF units are locked from selling for a certain period of time. For example, tax-saving funds have a lock-in period of 3 years. Such locked-in units cannot be used as collateral.

3. What is the processing fees?

• The processing fees is calculated based on your total loan amount.

Linking Bank Account

1. Why do I have to link a bank account?

• Your linked bank account is used to receive approved loans and make hassle-free monthly interest payments through auto-debit and flexible repayments.

2. Why is e-mandate required?

• E-mandate is required for the auto-collection of interest on a monthly basis. This helps in incurring any penalties due to late monthly interest payments. 

Loan Disbursal

1. How long does it take for the amount to get disbursed?

• After the application process is completed, the loan amount will be disbursed to your bank account in a couple of hours. 

• Once you submit your loan application, the lender will verify the details. If everything is in order, your application will be approved, and you’ll receive the funds in 2 hours.

• If your loan application is taking too long to process, please contact our support team and we’ll resolve your issue as soon as possible.

Managing Your Loan

1. What will my monthly payments look like? 

• On a monthly basis, you only pay interest at the rate of 10.75% p.a. on the outstanding loan amount. For instance, if you have an outstanding loan of ₹1 lakh, your monthly payment would be (1 lakh) x (10.75/12)/100) = ₹895.

2. How can I pay back the loan fully/partially?

• You have the flexibility to repay the principal amount, in full or partially, at your convenience before the end of your loan tenure i.e. 36 months. Simply visit the loan servicing dashboard click on the ‘Repay cash’ button, and enter the amount you want to repay.

3. What is the tenure of my loan?

• The default tenure of the loan is 36 months. However, you can choose to close the loan early without any foreclosure charges. The loan tenure can also be extended beyond 36 months.

We hope this guide was helpful in answering your queries regarding Loans Against Mutual Funds. If you have any concerns, questions, or feedback, please don’t hesitate to contact us via email at help@smallcase.com or chat with our support team.