HDFC Loan Against Mutual Funds in 2026
At some point, most investors run into a large expense like a renovation, a big purchase, or a long trip. If your money is tied up in mutual funds, you don’t have to sell your holdings. You can pledge your portfolio and borrow against it instead. If you hold HDFC mutual funds, smallcase lets you apply for a loan against them in a few hours, entirely online. The loan has a current interest rate starting at 9.99%. Here’s everything you need to know about how it works.
What is an HDFC Loan Against Mutual Fund?
An HDFC loan against mutual fund is a credit facility where your HDFC mutual fund holdings are pledged as collateral in exchange for a loan. You don’t sell your investments; you simply borrow against them. Interest accrues only on the amount you withdraw, and your funds continue generating returns throughout the loan tenure.
On smallcase, this loan is currently offered by Bajaj Finance Limited and is structured as a revolving overdraft credit line, giving you the flexibility to borrow, repay, and borrow again without reapplying.
Can You Pledge HDFC Mutual Funds for a Loan on smallcase?
Yes, but eligibility depends on which specific HDFC funds you hold. To be eligible, your mutual funds must be on the lender’s list of eligible funds.
Your HDFC mutual funds may not qualify for the loan against mutual funds if they are:
- ELSS (tax-saving) funds are currently under a 3-year lock-in
- Already pledged elsewhere
- Not on the lender’s approved securities list
The smallcase app will show you exactly which of your HDFC holdings are eligible once you import them. It’s worth checking this before planning around a specific loan amount.
How to Apply for an HDFC Loan Against Mutual Fund?
Applying is a completely digital and paperless process. Here are the steps:
- Got to smallcase.
- Go to the ‘Credit’ tab and select ‘Against Mutual Funds’
- Import your HDFC mutual fund holdings to check which funds are eligible and display your maximum credit limit
- Select the eligible HDFC funds you want to pledge and confirm your loan amount (you can borrow less than the maximum)
- Link your bank account and set up an e-mandate for monthly interest auto-debit
- Pledge your selected HDFC mutual funds
- E-sign the loan agreement online
- Funds are credited to your bank account within 2 working hours!
If you drop off mid-application, you can resume from that point at any time.
Documents Required to Avail an HDFC Loan Against Mutual Funds on smallcase
You’ll only need your PAN and the phone number or email address linked to your mutual fund holdings. Some users may also be asked to verify their Aadhaar. There are no physical documents, no branch visits, and no lengthy paperwork. You can find more information about the required documents and eligibility here.
Will the HDFC Funds Still Generate Returns After Getting Pledged for Loans?
Yes, you will continue earning returns on your HDFC funds even after pledging them as loan collateral. However, it is not possible to redeem/sell those funds after you have pledged them for loans on smallcase. You must wait until the loan is repaid to take any of those actions.
Can You Sell Your HDFC Mutual Funds After Pledging Them for Loans on smallcase?
No. You can only continue generating returns on your investments after pledging them for loans. You can only redeem/sell these HDFC fund investments after the loan amount is completely repaid.
What Happens in the Case of Active SIPs or Invest More (Lump sum Investments) in Pledged HDFC Mutual Funds?
Additional investments in pledged mutual funds, whether made in lump sum or through SIP orders, remain unaffected. Unit holders retain complete control over these investments, as they do not automatically become pledged.
Moreover, pledging funds for a loan against securities for business or emergencies through smallcase temporarily suspends any Active System Transfer Plan (STP) or Systematic Withdrawal Plan (SWP) initiated by the investor.
How is the Loan Amount Calculated?
The credit limit is calculated by applying a percentage to the current market value of the mutual funds you wish to pledge, 45% for equity funds and 75% for debt funds.
For example:
- HDFC equity funds worth ₹10 lakh → eligible for up to ₹4.5 lakh
- HDFC debt funds worth ₹10 lakh → eligible for up to ₹7.5 lakh
Note: Your actual eligible amount may be lower if some of your HDFC funds are under lock-in, already pledged, or outside the lender’s approved list. Checking your credit limit does not affect your CIBIL score.
HDFC Mutual Funds Fees and Charges
| Fee Type | Amount |
| Interest Rate | Starts at 9.99% |
| Processing Fee | ₹999 or 1% of loan amount, whichever is higher (max ₹4,999 + GST) |
| Late Payment Interest | 1.5% per month |
| Bounce Charges | ₹1,200 per bounce |
| Foreclosure Charges | Nil |
| Part-Prepayment Charges | Nil |
| Lien Removal (after taking loan) | Nil |
| Lien Removal (cancelled before disbursement) | Actual processing fee applicable |
| Demat Pledge Charges | ₹50 + GST per security (lender) + ₹32 + GST per security (Zerodha) |
Note: This information was updated on 28th April 2026.
To Wrap It Up…
An HDFC loan against mutual fund is one way to access liquidity from your portfolio without selling your investments. With interest starting at 9.99% at smallcase, with no foreclosure charges, and a fully digital process that disburses funds in under 2 working hours, it works out cheaper than most personal loan options for investors who already hold mutual funds. That said, not every HDFC fund will qualify; eligibility depends on the lender’s approved list, so checking your specific holdings in the app before planning around a loan amount is the right first step.
All About Loan Against Securities & Loan Against Mutual Funds on smallcase –
smallcase offers quick and easy disbursement of loans against mutual funds ( LAMF). Explore all about the eligibility criteria, documents required, features, and benefits of a Loan against mutual funds on smallcase
Frequently Asked Questions on Loan Against HDFC Funds
Absolutely. You can consider smallcase for this! Just import your HDFC fund holdings onto smallcase and check your maximum eligible loan amount and apply for a loan right away. You can also get a LAMF against any other MF holdings you may have, with smallcase in just under 2 working hours!
In smallcase, your credit limit mirrors the maximum loan achievable with your eligible mutual funds. It’s calculated by applying a percentage to the value of your selected mutual funds, which serve as collateral. Equity mutual funds offer a 45% lending percentage, while debt mutual funds provide a 75% lending percentage at smallcase.
The default tenure of the loan against mutual funds for individuals or businesses at smallcase is 36 months. However, you can choose to close the loan early without any HDFC loan foreclosure online charges. The loan tenure can also be extended beyond 36 months.
No. There are no lien removal charges if you request one after taking out the HDFC loan against mutual funds for investors or personal use. The lien removal charges, if requested before taking the loan, is ₹500.
The tenure of the loan repayment against HDFC mutual funds at smallcase is 36 months. The default tenure is one year, however the loan will be auto-renewed by the lender at the end of each year.
Note: This information regarding interest rates was updated on 28th April 2026.
It depends on the type of fund. The credit limit is calculated by applying a percentage to the current market value of the mutual funds you wish to pledge. To get a quick estimate of your monthly interest outgo before applying, use the LAMF EMI Calculator.
That depends on your situation, including how long you plan to stay invested, your expected returns, and the cost of the loan. The Loan vs Redemption Comparison Calculator can help you run the numbers before making a call.
