Mirae Asset Loan Against Mutual Funds: How to Apply, Interest Rates, and Eligibility
An urgent cash need can make mutual fund investors rethink whether to hold or redeem their units. Selling units may provide quick liquidity, but it can interrupt compounding, affect long-term financial goals, and trigger tax implications. In such cases, a loan against mutual funds offers an alternative: investors can pledge eligible units as collateral to access funds without selling their holdings.
This article explains how investors holding Mirae Asset mutual funds can apply for a loan against their holdings, along with eligibility, credit limits, interest rates, repayment terms, and key points to review.
What Is a Loan Against Mutual Funds?
A loan against mutual funds is a secured credit facility where you borrow money by pledging your mutual fund units as collateral. The lender places a lien on the pledged units. These units stay in your folio or demat account and continue to earn returns, but you cannot sell or redeem them until you fully repay the loan. The loan works like an overdraft, so you can withdraw money from your approved credit limit as needed, pay interest only on the amount used, and repay within the loan tenure and there are no fixed EMIs.
Loan Against Mirae Asset Mutual Funds on smallcase
Investors holding eligible Mirae Asset equity, debt, or hybrid schemes can pledge those units on smallcase to access a credit line. The credit limit is calculated based on the current market value of the pledged units and the applicable loan-to-value (LTV) ratio.
Mirae Asset schemes, along with funds from other AMCs, are accepted if they appear on the lender’s approved list. Over 8,000 schemes are eligible across fund houses. The minimum loan amount is ₹25,000, the tenure is 36 months, and the interest rate starts at 9.99% p.a. on the outstanding drawn amount.
Funds are disbursed digitally, usually within 2 working hours of completing the application. There are no foreclosure or part-prepayment charges.
Disclaimer: This information is for educational purposes only and should not be treated as financial advice. Please consult your financial advisor before applying.
How to Apply for a Loan Against Mirae Asset Mutual Funds?
Here is the step-by-step process on smallcase to take a loan against Mirae mutual funds:
- Log in to smallcase Credit: Visit smallcase Credit and select Against Mutual Funds to begin.
- Import holdings: Enter PAN, registered email ID, and phone number to fetch mutual funds.
- Check eligible funds: View eligible Mirae Asset schemes and the credit limit.
- Select funds: Choose units to pledge as collateral.
- Link bank account: Add bank details and set up e-mandate.
- Pledge units: Selected units are lien-marked with the lender.
- Sign agreement: Verify with OTP and sign digitally.
- Disbursement: The amount is usually credited within 2 working hours.
Features of Loan Against Mirae Asset Mutual Funds
- Credit Limit: Based on the market value of your pledged Mirae Asset units. Equity and equity-oriented hybrid schemes typically have a 45% LTV; debt schemes have up to 75%.
- Lien Marking: Units are lien-marked in favour of the lender and stay in your folio or demat account. Ownership remains with you throughout the loan period.
- Tenure: 36 months. You can repay and close the loan at any point before the tenure ends without any charges.
- Overdraft Structure: The loan works as a revolving credit line. You draw what you need, pay interest only on the drawn amount, repay, and draw again, and no reapplication is needed.
- Investments Stay Active: Mirae Asset units continue to earn returns and reflect NAV changes during the loan period. Dividends are also credited as usual. However, pledged units cannot be redeemed or switched until the lien is released.
- Paperless Process: PAN and the registered contact details linked to your folios are all that is needed. No income proof or physical documents are required.
- Interest Rate: The interest rate starts at 9.99% p.a., and it is calculated only on the outstanding drawn balance, not on the full credit limit.
- No Exit Charges: You can prepay in part, repay in full, or close the loan at any time. No prepayment, foreclosure, or part-closure charges apply.
- Tax Position Unchanged: Pledging Mirae Asset units does not alter their tax treatment. Capital gains tax is only applicable if units are sold or redeemed, not by pledging them.
Eligibility Criteria for Loan Against Mirae Asset Mutual Funds
The following eligibility conditions apply to loans against mutual funds on smallcase:
| Eligibility Criteria | Details |
|---|---|
| Age | 18 to 70 years |
| Residency | Resident Indians only |
| Investor Type | Individual account holders only. Joint folios are not eligible. |
| Fund Eligibility | Mirae Asset equity, debt, and hybrid schemes on the lender’s approved list |
| KYC | Active PAN; registered email and phone number linked to folios |
| Not Eligible | ELSS units under the 3-year lock-in, already-pledged units, and schemes not on the approved list |
Documents Required to Apply for a Loan Against Mirae Mutual Funds
The process to apply for LAMF is entirely paperless, and no physical documents are needed. You will require:
- PAN: Used for identity verification and to fetch your mutual fund holdings.
- Registered Email ID: Used to import Mirae Asset and other CAMS-serviced fund folios.
- Registered Phone Number: Used to import KFintech-serviced fund folios.
- Bank Account Details: For receiving the disbursed loan amount and setting up the monthly interest auto-debit.
- OTP: To digitally sign the loan agreement at the end of the application.
How to Calculate Your Credit Limit for a Loan Against Mirae Mutual Funds?
Your eligible credit limit is determined by the type of Mirae Asset mutual funds you choose to pledge and their current market value:
| Mutual Fund Type | LTV (Credit Limit) | Illustration |
|---|---|---|
| Equity Mutual Funds | 45% of current market value | ₹3,00,000 in Mirae Asset Large & Midcap → ₹1,35,000 credit limit |
| Debt Mutual Funds | 75% of current market value | ₹2,00,000 in Mirae Asset Liquid Fund → ₹1,50,000 credit limit |
For example, If you pledge ₹3,00,000 in Mirae Asset equity schemes and ₹2,00,000 in Mirae Asset debt schemes, your total credit limit would be ₹1,35,000 + ₹1,50,000 = ₹2,85,000.
If you draw ₹1,50,000 from this limit at 9.99% p.a., the monthly interest is: ₹1,50,000 x (9.99 / 12) / 100 = approximately ₹1,249. Interest applies only to the ₹1,50,000 drawn and not to the full ₹2,85,000 credit limit.
Impact on Your Mirae Asset Mutual Funds After Pledging
- Units Remain in Your Name: A lien is placed on the pledged Mirae Asset units, but ownership stays with you. The units continue to reflect NAV changes and remain in your folio or demat account throughout the loan period.
- Returns Are Not Interrupted: NAV appreciation and any dividend payouts from your Mirae Asset schemes continue throughout the loan term. The tax treatment of the units also remains the same unless they are eventually sold or redeemed.
- You Can’t Exit Pledged Units: Pledged units cannot be redeemed, switched to another scheme, or transferred during the loan period. They are released only when the loan is fully repaid, and the lender removes the lien.
- Fresh Investments Are Permitted: You can continue buying new units in the same Mirae Asset schemes through lump-sum purchases or SIPs. These new units are not automatically added to the pledge.
- No Partial Release: On smallcase, the lien is on the full set of pledged units. Partial unpledging is not available. Units are released together only on complete loan closure.
How to Manage Your Loan Against Mirae Mutual Funds?
Monthly Interest Payments
Interest is calculated on your outstanding drawn balance and auto-debited from your linked bank account on the due date each month. The calculation is based only on the amount you have used, not the full credit limit.
For example, if you have drawn ₹80,000 at 9.99% p.a., your monthly interest is approximately ₹666.
Loan Dashboard
You can monitor and manage the loan through the dashboard on the smallcase app or website:
- Check the outstanding loan balance and available credit
- View the next interest due date
- Make repayments or request additional withdrawals
- Track lien-marked Mirae Asset units
Withdrawals and Repayments
The overdraft structure gives you flexibility on both sides:
- Withdraw as needed: Draw any amount from your available credit limit, minimum ₹1,000 per withdrawal, without reapplying.
- Repay on your terms: Repay the principal in part or in full at any time. No charges apply.
- Credit restores on repayment: Amounts you repay become available to draw again immediately, as long as the loan is within its 36-month tenure.
- Interest adjusts in real time: Your monthly interest decreases as you repay principal and increases when you draw again. You always pay only for what is outstanding.
Loan Closure
To close the loan, repay the full outstanding principal and any accrued interest, then raise a closure request from the dashboard or contact support. Once confirmed:
- All lien-marked Mirae Asset units are released
- The lien is removed from your folio or demat account
- You regain full access to redeem, switch, or transfer the previously pledged units
- No foreclosure fee is charged
LTV Breach and Margin Calls
Because your credit limit is tied to the market value of pledged Mirae Asset units, a fall in NAV can affect your eligible borrowing limit. If the NAV drops enough that your drawn amount exceeds the permitted LTV, the lender will notify you of a shortfall.
- How a Breach Occurs: Equity funds have a 45% LTV limit, and debt funds have a 75% LTV limit. If the value of your pledged units falls, the eligible credit limit reduces accordingly. For example, if you pledged Mirae Asset equity units worth ₹1,00,000 and drew ₹45,000, and the fund value then drops to ₹90,000, your new eligible limit becomes ₹40,500. You would need to repay ₹4,500 to bring the outstanding balance within limits.
- Resolution Window: You receive a notification by email or SMS. You then have 7 days to either repay the excess amount or pledge additional eligible units to restore the LTV ratio.
- If the Breach Is Not Resolved: If the shortfall is not addressed within 7 days, the lender may sell a portion of the pledged Mirae Asset units to recover the outstanding excess. Additionally, if the full outstanding loan is not repaid by the end of the 36-month tenure, the lender may liquidate the pledged units at that point.
Interest Rates, Fees, and Charges for Loan Against Mirae Asset Mutual Funds
The following charges apply to a loan against Mirae Asset mutual funds on smallcase:
| Fee Type | Amount |
|---|---|
| Interest Rate | Starts from 9.99% p.a. on the outstanding drawn amount only |
| Processing Fee | ₹999 or 1% of loan amount, whichever is higher (max ₹4,999) + GST |
| Late Payment Interest | 1.5% per month on overdue interest |
| Bounce Charges | ₹1,200 per instance of failed auto-debit |
| Demat Pledge Charges | ₹50 + GST (lender) + ₹32 + GST (Zerodha) per security — applicable only for demat-held units |
| Part-Prepayment | Nil |
| Foreclosure | Nil |
| Lien Removal (after loan closure) | Nil |
| Lien Removal (cancelled before disbursement) | Actual processing fee applicable |
Processing Fee
The processing fee is a one-time charge at loan initiation. It is the higher of ₹999 or 1% of the loan amount, capped at ₹4,999. GST applies. The fee is non-refundable after disbursement.
Late Payment and Bounce Charges
If the monthly interest auto-debit fails or is not paid by the due date, a penalty interest of 1.5% per month applies on the overdue amount. A bounce charge of ₹1,200 applies each time the auto-debit instruction is dishonoured. Keeping your linked bank account funded on the due date avoids both charges.
Key Considerations Before Applying for a Loan Against Mirae Asset Mutual Funds
- NAV-Linked Credit Limit: Your credit limit moves with the market value of your Mirae Asset units. Mirae Asset’s equity schemes, which make up a significant portion of investor holdings, are subject to market fluctuations. A fall in equity NAV can reduce your available limit and, in a sharp correction, trigger a margin call.
- Lien Locks the Units: Once pledged, your Mirae Asset units cannot be redeemed or switched for the duration of the loan. If you anticipate needing to exit those positions for portfolio rebalancing or goal-based redemption, plan accordingly before pledging.
- Interest Runs on What You Draw: The longer the outstanding principal, the more interest accumulates. Even though your Mirae Asset units continue earning returns, the net benefit depends on the difference between what your funds earn and what the loan costs.
- Forced Sale Risk: If an LTV breach is not resolved within 7 days, or the loan is not repaid by the end of the tenure, the lender may sell the pledged units at the prevailing NAV. This may coincide with a market downturn and could create a capital gains tax event.
- No Tax Deduction on Interest: Interest paid on this loan does not qualify for any tax deduction under personal income tax provisions. It is treated as a personal borrowing cost.
- ELSS Units Under Lock-in: Mirae Asset Tax Saver Fund and other ELSS funds cannot be pledged while their 3-year lock-in period is active. Only units that have completed the lock-in and are on the approved list are eligible.
To Wrap It Up…
For investors with Mirae Asset mutual fund holdings, pledging eligible units can provide access to short-term funds without exiting long-term positions. However, before applying, it is important to check whether your specific Mirae Asset schemes are on the approved list, confirm the credit limit that would apply, and assess whether the monthly interest obligation fits your repayment capacity. Being aware of the LTV breach mechanism and the lien restriction on pledged units helps avoid complications during the loan period.Explore loans against mutual funds on smallcase, with interest rates starting at 9.99% p.a. Before making any financial decision, consider consulting a financial advisor to understand the costs, risks, eligibility, and repayment terms.
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 About Loan Against Mirae Asset Mutual Funds
Yes, eligible Mirae Asset equity, debt, and hybrid schemes can be pledged to access a credit line. The specific scheme must be on the lender’s approved list, and the borrower must meet the eligibility criteria.
Disclaimer: The above information is for educational purposes only and should not be treated as financial advice.
The interest rate depends on the lender, and it is calculated and charged only on the amount you draw from your credit limit, not on the full sanctioned limit. At this rate, a ₹1,00,000 outstanding balance incurs approximately ₹833 in interest per month.
Equity mutual funds are subject to a credit limit of 45% of their current market value. If you have ₹5,00,000 in eligible Mirae Asset equity schemes, your credit limit would be ₹2,25,000. For debt funds, the limit is 75% of market value.
Mirae Asset ELSS units cannot be pledged while the mandatory 3-year lock-in is active. Once individual units have completed their lock-in period, they may be eligible if the scheme is on the approved list. Note that each SIP instalment has its own 3-year lock-in start date.
No, your Mirae Asset units stay invested and continue to reflect NAV changes. Dividend payouts under IDCW plans are also credited as usual. The lien only restricts your ability to sell or redeem the pledged units, and it does not affect the returns on those units.
Yes, ongoing SIP contributions to a pledged Mirae Asset scheme continue normally. New units generated through SIPs are not automatically added to the pledge. Only the specific units lien-marked at the time of application remain under the pledge.
If the fall in NAV causes your outstanding loan to exceed the permitted LTV ratio, the lender will notify you of a shortfall. You have 7 days to repay the excess or pledge additional units. If unresolved, the lender may sell a portion of the pledged units to recover the amount.
Yes, there are no prepayment, part-prepayment, or foreclosure charges. You can repay any amount at any time. On full repayment, the lien on your Mirae Asset units is released, and you regain complete access to those units.
The minimum loan amount on smallcase is ₹25,000. There is no stated maximum; your credit limit depends on the type and market value of the Mirae Asset schemes you pledge.
Yes, you can pledge a combination of Mirae Asset schemes and eligible schemes from other AMCs in a single application. The credit limit is calculated across all eligible pledged units, regardless of the fund house.
