Eligibility & Documents Required for Loan Against Mutual Funds
A Loan Against Mutual Funds (LAMF) lets you borrow money by pledging your existing mutual fund investments as collateral, without redeeming them. Your funds stay invested and continue earning returns; you only pay interest on the amount you actually use.
In this guide, we cover everything you need to know about LAMF eligibility, the documents required, how credit limits are calculated, what happens to your pledged funds, fees and charges, and how to apply via smallcase.
LAMF at a Glance:
| Feature | Details |
| Minimum Loan Amount | ₹25,000 |
| Loan Tenure | 36 months (3 years) |
| Interest Rate | Starting at 9.99% p.a. (on outstanding amount only) |
| Disbursement Time | Within 2 working hours |
| Eligible Age | 18 – 70 years |
| CIBIL Score Impact | None; no hard credit check |
| Joint Account Holders | Not eligible |
| Foreclosure / Prepayment Charges | Nil |
| Processing Fee | ₹999 or 1% of loan amount (max ₹4,999) + GST |
| Documentation | Paperless; only PAN required in most cases |
| Lender | Bajaj Finance Limited (facilitated via smallcase) |
What is a Loan Against Mutual Funds?
A Loan Against Mutual Funds (LAMF) is a secured credit facility where your mutual fund units are lien-marked as collateral in favour of the lender. If you receive a revolving credit line, you can withdraw funds, repay, and re-withdraw within the sanctioned limit without reapplying.
Unlike a personal loan or a redemption, LAMF allows you to keep your investment intact. You continue to benefit from NAV appreciation and dividends. The loan is suitable for short-term liquidity needs such as medical expenses, home renovation, education costs, or business requirements.
How to Apply for LAMF via smallcase?
- Log in to smallcase Credit: Visit smallcase Credit and click on Against Mutual Funds to check your credit limit.
- Check eligible funds: View SBI mutual funds and other eligible holdings available for pledging.
- Select funds to pledge: Choose funds as collateral and check the credit limit.
- Link your bank account: Add bank details for disbursement and set up an e-mandate.
- Pledge your mutual funds: Selected units are lien-marked while staying in your folio or demat account.
- Sign the loan agreement: Review, verify with OTP, and sign online.
- Receive the loan amount: The amount is usually credited within 2 working hours after signing.
Loan Against Mutual Funds Eligibility
To apply for LAMF via smallcase, you must meet the following criteria:
| Eligibility Parameter | Requirement |
| Nationality | Indian resident |
| Age | 18 to 70 years |
| Employment | Salaried or self-employed (no restrictions on profession) |
| PAN Card | Mandatory; must be linked to your mutual fund folios |
| Joint Account Holders | Not eligible to apply |
| Income Proof | Not required; loan is secured against mutual fund units |
| CIBIL / Credit Score | No hard CIBIL check; checking eligibility does not affect your score |
Documents Required for a Loan Against Mutual Funds
The LAMF process on smallcase is completely paperless. Here is what you need:
- PAN Card (mandatory, used to fetch your mutual fund holdings)
- Registered email ID and/or mobile number linked to your mutual fund folios
- Bank account details (for loan disbursement and auto-debit of monthly interest)
That’s it. No physical documents, no income proof, no salary slips, no address proof in most cases. In rare cases involving discrepancies, you may be asked to provide your Aadhaar number.
Note: To fetch holdings from CAMS-serviced funds, use your registered email. For KFin-serviced funds, use your registered phone number. If you have multiple folios associated with different email IDs or phone numbers, enter all of them to ensure an accurate credit limit calculation.
How is the Credit Limit (LTV) Calculated?
Your credit limit depends on the type and value of mutual funds you pledge. The lender (Bajaj Finance) applies a Loan-to-Value (LTV) ratio:
| Mutual Fund Type | Credit Limit (LTV) | Max LTV Cap |
| Equity Mutual Funds | 45% of market value | 45% |
| Debt Mutual Funds | 75% of market value | 85% |
Example: If you hold ₹2 lakh in equity mutual funds, your credit limit will be ₹90,000 (45%). If you hold ₹2 lakh in debt mutual funds, your credit limit will be ₹1,50,000 (75%).
Why Does My Credit Limit Show ₹0?
There are a few common reasons:
- All your eligible fund values are below the minimum threshold
- Your funds are ELSS (under the 3-year lock-in period) and cannot be pledged
- Your funds are already pledged with another lender
- Your funds are not on Bajaj Finance’s approved list of 8,000+ eligible schemes
Which Mutual Funds Are Eligible for LAMF?
Over 8,000 mutual fund schemes across equity, debt, and hybrid categories are eligible. The approved list is maintained by Bajaj Finance.
Not Eligible:
- ELSS (Equity Linked Savings Scheme) funds under the mandatory 3-year lock-in period
- Funds already pledged or lien-marked with another lender
- Unlisted or unapproved schemes not on Bajaj Finance’s approved list
ELSS and LAMF:
ELSS funds can be pledged only after their 3-year lock-in has expired. During the lock-in period, these units are not transferable and cannot be used as collateral. Once the lock-in ends, they are eligible if they appear on the approved list.
SIP investments are eligible, you can pledge the accumulated units in any eligible SIP scheme. Only existing units are pledged; future SIP instalments are not affected.
What Happens to Your Mutual Funds After Pledging?
A common concern among applicants is whether pledging affects their mutual fund investments. Here is what changes, and what doesn’t:
| What Happens | Details |
| Lien marking | Units are lien-marked in favour of Bajaj Finance and remain in your folio/demat account |
| Returns & dividends | You continue to earn NAV appreciation and dividends as usual |
| Selling/redemption | You CANNOT sell or redeem pledged units until the loan is fully closed |
| New investments | You CAN continue new investments (including SIPs) in the same fund |
| Partial unpledging | NOT possible; all pledged units are released only on full loan closure |
| Tax treatment | No change unless pledged units are eventually sold or confiscated by the lender |
What Happens if Your Fund Value Drops? (LTV Breach)
Mutual fund values can fluctuate. If a fall in NAV causes the outstanding loan to exceed the permissible LTV, you will receive a notification from smallcase / Bajaj Finance.
- You have 7 days to repay the excess amount and bring the LTV back within limits.
- If the excess is not repaid within 7 days, Bajaj Finance may liquidate (redeem) pledged MF units to recover the amount.
- If the outstanding loan balance is not repaid by the end of the 36-month tenure, the pledged units may be liquidated.
Example: You pledge equity MFs worth ₹1,000 and borrow ₹450 (45% LTV). If the MF value drops to ₹900, the eligible limit becomes ₹405. With ₹450 outstanding, you must repay ₹45 to stay within limits.
Disclaimer: Mutual fund investments are subject to market risk. A decline in the value of your pledged funds may result in an LTV breach, requiring repayment or leading to liquidation of your pledged units. Please read all scheme-related documents carefully before pledging.
Managing Your LAMF After Disbursement
Accessing Your Loan Dashboard
You can access your Loan Dashboard from the More tab on the smallcase app. The dashboard lets you make repayments, request withdrawals, track interest dues, and start loan closure.
Monthly Interest Payments
The lender auto-debits interest from your linked bank account on the due date. You pay interest only on the outstanding principal, not on the full credit limit.
Monthly interest formula = Outstanding Amount × Interest Rate / 12 / 100
Use LAMF Interest Calculator to estimate your monthly interest before borrowing.
Repayment and Withdrawals Under Revolving Credit Line
LAMF works as a revolving credit line after disbursement. This means you can repay and withdraw again within the approved limit.
- Repay principal anytime: You can repay the principal at any time with zero fees using the Repay Cash button on the dashboard.
- Credit line is restored after repayment: Once you repay in full or in part, your available credit line is restored.
- Withdraw again without reapplying: You can withdraw the repaid amount again without reapplying. The minimum withdrawal amount is ₹1,000.
- Interest applies only to the outstanding amount: The lender charges interest only on the amount currently outstanding.
Loan Closure
You can close the loan at any time with zero foreclosure fees. Once you clear all dues, the lender releases the lien on your pledged mutual funds and closes the loan account. You can raise a closure request from the Loan Dashboard or contact smallcase support.
Fees and Charges
| Fee Type | Amount |
| Interest Rate | Starting at 9.99% p.a. (charged on outstanding principal only) |
| Processing Fee | ₹999 or 1% of loan amount (max ₹4,999) + GST |
| Late Payment Interest | 1.5% per month on the overdue interest amount |
| Bounce Charges | ₹1,200 per bounce |
| Demat Pledge Charges | ₹50 + GST (Bajaj Finance) + ₹32 + GST (Zerodha) per security |
| Part-Prepayment / Foreclosure | Nil |
| Lien Removal (post-closure) | Nil |
| Lien Removal (pre-disbursal cancellation) | Actual processing fee applicable |
To Wrap Up…
A Loan Against Mutual Funds via smallcase is a fast, fully digital way to access funds without disrupting your investment journey. With minimal documentation (just your PAN), no CIBIL impact, and a credit line that replenishes as you repay, LAMF is a practical alternative to personal loans for short-term liquidity needs.
Before applying, ensure your mutual funds are on the approved list, check your credit limit on the smallcase app, and review the LTV terms for your fund type.
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 Mutual Funds Eligibility
To apply for LAMF via smallcase, you must be between 18 and 70 years of age. You must also be an Indian resident, either salaried or self-employed. Joint account holders are not eligible to apply.
The application process is completely paperless. You need your PAN card and the registered email ID and/or phone number linked to your mutual fund folios. No salary slips, address proof, or income documents are required. In rare cases involving KYC discrepancies, your Aadhaar number may be requested.
Over 8,000 equity, debt, and hybrid mutual fund schemes approved by Bajaj Finance are eligible. ELSS funds under the 3-year lock-in period, funds already pledged elsewhere, and schemes outside the approved list are not eligible. SIP investments can be pledged based on the accumulated units.
Disclaimer: The approved list of eligible mutual fund schemes is subject to change at the lender’s discretion. Verify eligibility on the smallcase app before applying.
The interest rate for LAMF via smallcase starts at 9.99% per annum, charged only on the outstanding principal amount, not on the full sanctioned credit limit. Rates are subject to change per the lender’s policy.
Disclaimer: Interest rates are indicative and subject to revision by Bajaj Finance Limited. Please verify the applicable rate at the time of application.
No. Checking your credit limit on smallcase does not involve a hard CIBIL inquiry and will not affect your credit score. LAMF is a secured loan, so eligibility is assessed primarily on the value and type of your mutual fund holdings.
ELSS funds under the mandatory 3-year lock-in period are not eligible for LAMF. Once the lock-in period expires and the units appear on the approved list, they can be pledged. Check your eligibility on the smallcase app to confirm which funds qualify.
Your pledged funds are lien-marked in favour of Bajaj Finance but remain in your folio or demat account. You continue to earn returns and dividends. However, you cannot sell or redeem the pledged units until the loan is fully repaid. New investments in the same fund are still permitted. Partial unpledging is not available; all units are released together only when the loan is fully closed.
If a fall in NAV causes the outstanding loan to exceed the permissible LTV (45% for equity, 85% for debt), you will be notified and given 7 days to repay the excess. If the excess is not repaid, Bajaj Finance may liquidate pledged units to recover the shortfall. This is called an LTV breach.
Disclaimer: Mutual fund values are subject to market risk. A significant market downturn may trigger an LTV breach, requiring partial or full repayment. Please ensure you can service the loan even if fund values decline.
Yes. You can repay the principal at any time with zero foreclosure or part-prepayment charges. Once you repay, your available credit line is restored, and you can re-withdraw (minimum ₹1,000) without reapplying. The loan account can be closed in full at any time from the Loan Dashboard.
The processing fee is ₹999 or 1% of the loan amount, whichever is higher, subject to a maximum of ₹4,999, plus applicable GST. There are no hidden charges for foreclosure or lien removal after loan closure.
Disclaimer: Fees are as per Bajaj Finance Limited’s current schedule and are subject to change. Please verify charges at the time of application.
No. LAMF via smallcase is currently available only to Indian residents. NRIs are not eligible to apply at this time.
No. Joint account holders are not eligible for LAMF via smallcase. The loan must be applied for by the primary or sole account holder only.
Yes. Since LAMF is a secured loan, proof of income is not required. Eligibility is determined by the value and type of mutual funds you pledge. There are no restrictions on profession, employment type, or income level, as long as you meet the age and residency criteria.
The minimum loan amount via smallcase is ₹25,000. You can borrow in multiples of ₹1,000 up to your sanctioned credit limit.
Yes. The pledge is created digitally through CAMS/KFintech and is a standard, regulated process in accordance with SEBI and RBI guidelines. Bajaj Finance holds the lien for the duration of the loan; your fund units remain in your account. smallcase does not share user data with any third party.
Disclaimer: Mutual fund investments are subject to market risk. Read all scheme-related documents carefully before investing or pledging. The information in this article is for educational purposes and does not constitute financial advice.
