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Features of Loan Against Mutual Funds(LAMF)

Features of Loan Against Mutual Funds(LAMF)
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What is Loan Against Mutual Funds?

Similar to how you can take a loan against any collateral (gold, house, etc.) , you can also take a loan against your Mutual funds (MFs) as collateral at a very competitive interest rate – at smallcase, this interest rate is at 10.75% per annum.

Key Features

  • Access to Instant Credit: LAMF serves as a source of ready funds that individuals can tap into whenever the need arises. It offers a predetermined credit limit, allowing you to access cash quickly without going through the process of applying for a new loan each time you require funds. Like a traditional credit line, LAMF operates on a revolving structure. Once a portion of the loan is repaid, that amount becomes available again for borrowing.
  • Lower Interest Rates: The interest rates on credit cards and personal loans are typically higher than on loans against mutual funds. Thus, adopting LAMF can save you more money on interest payments than other loan alternatives.
  • Lower Monthly Payments: With a loan against mutual funds, you only have to pay the interest every month on the funds you borrow. For instance, if your loan amount is 1 lakh. You only need to pay Rs. 875 every month at the interest rate of 10.75% p.a. You have complete flexibility to repay the principal any time before the loan tenure ends.
  • No Prepayment Penalties: You can choose to repay the principal and any other outstanding interest early without paying any additional prepayment or foreclosure charges.
  • Flexible Repayment Terms: Choose to repay the principal anytime repayment period that best suits your needs.
  • No Proof of Income Requirement: Unlike traditional loans that often require proof of income such as salary slips, LAMF simplifies the borrowing process. Any individual with valid mutual fund holdings can get a loan against their mutual funds using only just their PAN.

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What Can You Use a Loan Against Mutual Funds For? 

You can take a LAMF for a variety of reasons, some of the use cases include :

  • Alternative to Personal Loan because of lower interest rates
  • Downpayment for high-ticket loans like house loans, car loans, etc.
  • High-ticket expenses like wedding expenses, medical expenses, etc. 
  • Refinancing an existing loan courtesy of lower interest rates offered by this loan
  • A credit line that allows users to withdraw funds anytime and pay interest only on withdrawn funds

How is Loan Against Mutual Funds Different from Personal Loan?

The key differences between Loan Against Mutual Funds & lien marking loans are basis the following two parameters –  

  • Lower interest rates: LAMF offer a more competitive interest rate than Personal Loans
  • Only interest payment every month: In Personal loans, you have to pay a part of the principal amount and interest every month in the form of an EMI. 

In the case of Loans Against Mutual Funds, you pay only the interest every month with the freedom of paying the principal amount anytime you want at no extra cost. 

What is the Criteria for Eligibility for Loan Against Mutual Funds at smallcase?

Unlocking a mutual fund loan with smallcase is easy. Whether self-employed or salaried, residents of India aged 18-65 or non-resident individuals, you can apply for loans up to ₹5 Crore against approved Mutual Funds held with CAMS & KFintech.

What are the Documents Required to Take a LAMF at smallcase?

Applying for a loan against mutual funds is a completely digital and paperless process. You’ll need only your PAN (if you’ve never invested on the smallcase platform) and the phone number/email address linked to your mutual funds.

How to apply for a Loan Against Mutual Funds?

You can get a LAMF through a completely paperless & digital process that can be completed in 5 minutes on the smallcase app.

Here are the steps to follow –

  1. Login on the smallcase app
  2. Go to the More tab, click on Loan Against Mutual Funds
  3. Check your credit limit
  4. Click on Apply Now
  5. Import your MF Holdings & pledge the holdings depending on the loan amount
  6. Sign the loan agreement
  7. Get cash in your bank account within 2 hours

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1. How much loan can I get?

You can avail a loan against mutual funds from ₹25,000 to ₹5 crore.

2. What will be the interest rate?

The interest rate of 10.75% p.a. is applicable on the outstanding principal. No interest rate is charged for repaid principal amount.

3. What are the minimum and maximum required age for availing a loan against mutual fund?

To avail LAMF, an individual should be between 18 years to 65 years of age.

4. Where can I find the approved list of mutual funds that I avail LAMF against?

Easily obtain a loan against your mutual funds online. You can explore mutual fund schemes on the smallcase app for a convenient overview.

5. Can I avail loan against mutual funds held in demat form?

No, you cannot obtain a lien marked or otherwise loan against mutual funds held in demat form. The funds must be in the Statement of Account (SOA) form with RTAs like CAMS or KFin.

All About Loan Against Securities & Loan Against Mutual Funds on smallcase – 

smallcase offers 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 loan is just one click away – 

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Features of Loan Against Mutual Funds(LAMF)
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