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Understanding monthly instalments on LAMF in 1 minute

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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 10.75%, which results in a monthly interest payment of ₹896. This is lower compared to traditional loans where both interest and principal are paid monthly.

Monthly payments for different loan amounts

Loan amount	Interest rate	Monthly installment
₹25,000	10.75%	₹224
₹50,000	10.75%	₹448
₹75,000	10.75%	₹672
₹1,00,000	10.75%	₹896

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 ₹1 lakh in January and you repay ₹50,000 in February, your outstanding principal drops to ₹50,000, and from the next month onward, your monthly interest payment is halved to ~₹448. 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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Shivani Shah

Content & marketing @smallcaseHQ The content in this article is purely the author’s personal opinion and is for informational and educational purposes only. It should not be construed as professional financial advice and nor to be construed as an offer to buy /sell or the solicitation of an offer to buy / sell any security or financial products. The views and opinions stated in the content belong to the author. Smallcase Technologies Private Limited does not uphold nor promote any of the views / opinions.

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