LAMF Processing Fee and Interest Rate
Many investors turn to Loans Against Mutual Funds (LAMF) when they need liquidity but don’t want to disrupt their long-term investment goals. It may be a convenient option, but the real cost of borrowing goes beyond the loan amount itself. Processing fees and interest rates can make a noticeable difference in how affordable the loan actually is. If you’ve ever wondered why two people borrowing the same amount end up paying different totals, this is often where the answer lies. This article delves into LAMF processing fees, the rate of interest on loan against mutual funds, and their implications for investors seeking liquidity against their mutual fund holdings.
What is LAMF?
A Loan Against Mutual Fund (LAMF) is a process where an individual can avail loan by pledging its mutual fund holdings as collateral. Unlike a personal loan, which is typically unsecured, a loan against mutual funds is secured, which makes it easier to obtain and often comes with lower interest rates.
You can learn about the LAMF eligibility criteria and documents here. – ‘LAMF Eligibility and Documents Required’.
Features of LAMF
Loans against mutual funds come with several key features that make them a preferred option for many investors. With smallcase, you can safeguard yourself against unexpected financial needs by borrowing funds secured against your mutual fund investments.
Instant Access to Credit
Get an instant loan by pledging your mutual fund units. Based on the type of fund, you can access a pre-approved loan limit for immediate financial requirements. This comprises 45% of equity mutual funds and 75% of debt mutual funds.
Competitive Interest Rates
The interest rate on loans against mutual funds on smallcase is available at 10.5% – 10.9% per annum, which is significantly lower than typical personal loans or credit card interest rates.
Flexible Loan Tenure
The standard loan term is 36 months. However, you can choose to repay the loan early without incurring any foreclosure charges.
Low Monthly Payments
Only interest is payable monthly on the borrowed amount. For instance, borrowing ₹1 lakh at 10.5% interest would require a monthly interest payment of just ₹875. The principal can be repaid anytime during the tenure.
No Foreclosure Penalty
You’re free to repay the loan in part or in full at any time with zero prepayment penalties.
Convenient Repayment Options
Repayment terms are designed to offer flexibility, which allows you to clear the principal at your convenience within the loan period.
Interest Rate at smallcase
When it comes to LAMFs, the interest rate is one of the most critical factors to consider. The interest rate on a loan against mutual funds is 10.5% – 10.9% per annum at smallcase
Processing Fees & Other Charges at smallcase
Here’s are the processing fees and charges applicable on loan against mutual funds via smallcase. To learn more about the particulars of this loan, please refer to our article on ‘Frequently Asked Questions (FAQs) About LAMF’
| Type of fee | Applicable charges |
| Processing fee | ₹999 or 1% of loan amount whichever is higher upto a maximum of ₹4,999 (GST applicable)Example –loan less than 1 lakh: ₹999 + GSTloan between 1 to 5 lakh: 1% of sanctioned amt + GSTloan greater than 5 lakh: ₹4,999 + GST |
| Late Payment Interest | Penal Interest is charged @ 2% per month |
| Demat pledge charges | Lender charges Rs. 50 + GST per demat security and Zerodha charges Rs. 32 + GST per demat security |
| Bounce charges (for failed interest payment) | Rs 1,200 per bounce |
| Part-prepayment charges | NIL |
| Foreclosure charges | NIL |
| Mandate inactive charges | NIL |
| Mandate verification (charged by your bank) | As charged by your bank (typically between Rs. 0 to Rs. 150) |
| Lien removal charges (if requested after taking loan) | NIL |
| Lien removal charges (if loan is canceled before disbursement) | Actual processing fee applicable |
| Collection/legal Charges (in case of default) | At actuals |
| Demat lien invocation charges (in case of liquidity) | 0.02% + Flat Rs. 5 + GST per demat security (Min Rs. 55 and Max Rs. 1005) |
| Demat share transfer charges (PAYIN) | 0.02% + Flat Rs. 5 + GST per demat security (Min Rs. 55 and Max Rs. 1005) |
| Stamp duty | 0.015% on Demat lien invocation value |
Note: This information regarding interest rates was updated on 14th February 2025. For the latest updates on interest rates, fees, and charges, visit the smallcase help centre for LAMF.
Loan Against Mutual Fund Fees & Charges Example
The fees and charges associated with a loan against mutual funds are often overlooked but can significantly impact the overall cost of the loan. Here’s an example of how the loan against mutual funds processing fees and interest rates could break down:
Let’s assume an investor pledges mutual funds worth ₹10,00,000 for a loan and the interest rate is 10.5%
- Loan Amount: ₹7,00,000 (assuming a loan-to-value ratio of 70%)
- Interest Rate: 10.5% per annum
- Processing Fee: 1% of the loan amount upto a maximum of ₹4,999
- Tenure: 1 year
In this example:
- The investor will borrow ₹7,00,000, and the processing fee of ₹4,999 will be deducted at the time of loan disbursal.
- Over the course of the year, interest will be charged on the outstanding loan balance at the rate of 10.50%. For simplicity, if the loan is paid off in one lump sum at the end of the year, the total interest payable would be ₹70,000.
This would result in the investor repaying a total of ₹7,78,499 (₹7,00,000 principal + ₹73,500 interest + ₹4,999 processing fee).
While the loan on mutual funds offers lower rates compared to personal loans, the interest costs can still add up. Therefore, it’s crucial for investors to evaluate the loan against mutual funds interest rate comparison to determine the most cost-effective option. To learn more about the benefits of LAMF, click here.
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 LAMF Processing Fee and Interest Rate
The interest rate for a loan against mutual funds at smallcase is 10.5% – 10.9% per annum.
Interest is typically charged only on the amount utilised and for the duration it’s used, rather than on the total sanctioned limit.
Processing fees differ among lenders. smallcase charges ₹999 or 1% of the loan amount, whichever is higher, upto a maximum of ₹4,999.
There are no foreclosure or prepayment charges at smallcase.
At smallcase, the default tenure of the loan is 36 months
