Loan Against Mutual Funds (LAMF) Fees & Charges on smallcase
The interest rate on a Loan Against Mutual Funds (LAMF) is generally lower than personal loans or credit cards because the loan is secured by mutual fund units pledged as collateral. But the stated interest rate is only part of the picture. Processing fees, demat charges, late payment interest, and other levies all add to the actual cost of borrowing.
On smallcase, you can take a loan against mutual funds from three lenders: Bajaj Finance, South Indian Bank and DSP Finance as of October 2026. Fees and charges differ by lender, so this page lists them side by side.
How LAMF Interest Works?
It is important to understand when interest starts, which amount it applies to, and how repayments affect the total interest payable. Let’s look at how it works.
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Interest Is Charged on the Drawn Amount Only
Most LAMF products are structured as an overdraft (OD) credit line. This means the lender sanctions a credit limit based on the value of your pledged funds, but you are not charged interest on the full limit. Interest accrues only on the amount you actually draw, and only for the number of days it is outstanding.
If you are sanctioned a credit limit of ₹1,00,000 but draw only ₹40,000, interest is charged on ₹40,000, not on ₹1,00,000. If you repay ₹20,000 the following week, interest is charged on ₹20,000 from that point onward.
How Is Interest Calculated?
Interest on LAMF is typically calculated daily on the outstanding drawn balance. The formula is:
Daily interest = Outstanding principal x Annual rate / 365
Monthly interest = sum of daily interest charges for the period
Example: ₹1,00,000 drawn at 9.9% p.a. for 30 days = ₹1,00,000 x 9.9% / 365 x 30 = approximately ₹825.
This daily accrual on the drawn amount is what makes LAMF structurally different from a term loan, where interest is charged on the full outstanding principal from the disbursement date, typically on a monthly reset basis.
What Determines the Interest Rate on LAMF?
LAMF rates are not uniform. Several factors influence the rate a borrower is offered:
Lender Type: Banks vs NBFCs
Banks typically price LAMF loans linked to their internal benchmark rates, usually the MCLR (Marginal Cost of Funds-Based Lending Rate) or the repo rate, plus a spread. This means rates can change over the loan tenure if the benchmark changes.
NBFCs may offer fixed or floating rates depending on their product structure. NBFC rates can be higher or lower than bank rates, depending on the platform and the lender’s funding cost.
Fund Type: Equity vs Debt
Rates also vary by the type of funds pledged. Equity mutual funds carry higher NAV volatility, which increases risk for the lender. Some lenders price equity-backed loans slightly higher than debt-backed ones, or set stricter LTV ratios for equity funds. On smallcase, you can borrow up to 85% of the value of eligible debt funds. The LTV for equity funds depends on the lender.
Fixed vs Floating Rates
Borrowers taking a LAMF for a longer tenure should check whether the interest rate is fixed or floating. A floating rate product tracks a benchmark; if the benchmark rises, the monthly interest cost increases. A fixed-rate product locks in the cost for the tenure. For your loan on smallcase, your loan agreement states the rate type.
Borrower Profile
Since LAMF is a secured loan, most lenders do not require a minimum credit score. However, some may offer better rates to borrowers with strong credit profiles or existing relationships with the institution. Income level is generally not a factor, as eligibility is driven by collateral. Checking your credit limit on smallcase does not affect your CIBIL score. Once you apply and sign the loan agreement, a hard CIBIL check is done, which can affect your score.
Interest Rate on Loan Against Mutual Fund on smallcase
On smallcase, LAMF is offered at a rate starting at 9.9% p.a. Interest is charged only on the outstanding drawn amount, not the full sanctioned credit limit, and accrues daily. It is debited monthly from your linked bank account via auto-debit.
| Interest rate | LAMF interest rates start from 9.9% p.a. |
| Charged on | Outstanding drawn amount only, not on the full credit limit |
| Accrual | Daily on outstanding balance |
| Debited | Auto-debited on the 7th of every month (or within the next 3 working days) |
| Unused credit limit | No interest charged |
Fees and Charges by Lender
| Charge | Bajaj Finance | South Indian Bank | DSP Finance |
| Processing fee | ₹999 or 1% of the loan amount, whichever is higher, up to ₹4,999 (plus GST) | ₹1,250 or 1% of the loan amount, whichever is higher, up to ₹4,999 | ₹999 or 1% of the loan amount, whichever is higher, up to ₹4,999 |
| Late payment and penal charges | 1.5% per month on overdue interest; 18% p.a. on delayed instalments | 6% p.a. | ₹10 to ₹10,000 per day (excl. GST), depending on the unpaid amount |
| Bounce charges | ₹1,200 per bounce | Nil | Not applicable (see dishonour charges) |
| Dishonour and non-registration charges | Not applicable | Not applicable | ₹500 + 18% GST per dishonoured or unregistered payment instruction |
| Lien removal (if requested after taking the loan) | Demat pledge charges apply; ad hoc requests ₹390 per lien and ₹118 per un-lien, incl. taxes | No charges | No charges |
| Part-prepayment and foreclosure | Nil | Nil | Nil |
Disclaimer: The fees and charges above are as of 7th October 2026 and are subject to change. For the latest information, visit our help centre.
Other Charges (Listed for Bajaj Finance)
| Charge | Amount | When it applies |
| Demat pledge charges | ₹50 + GST (lender) and ₹32 + GST (Zerodha) per demat security | When pledging units held in a Zerodha demat account |
| Lien removal before disbursal | Actual processing fee | If the loan is cancelled before disbursal |
| Demat lien invocation charges | 0.02% + ₹5 + GST per demat security (min ₹55, max ₹1,005) | If pledged demat units are sold to recover dues |
| Demat share transfer charges (PAYIN) | 0.02% + ₹5 + GST per demat security (min ₹55, max ₹1,005) | As per the lender’s terms |
| Stamp duty | 0.015% of the demat lien invocation value | On demat lien invocation |
| Mandate verification | As charged by your bank (typically ₹0 to ₹150) | When setting up the auto-debit mandate |
| Mandate inactive charges | Nil | Not applicable |
| Collection and legal charges | At actuals | Only in case of default |
Disclaimer: The fees and charges above are as of 7th October 2026 and are subject to change. For the latest information, visit our help centre.
All Fees and Charges Explained for Loan Against Mutual Fund
Interest on Outstanding Principal
The primary recurring cost. Charged on the outstanding drawn amount only, calculated daily, and debited monthly from your linked bank account. No interest is charged on the unused portion of the credit limit.
Late Payment Interest
If the monthly interest auto-debit fails or the overdue amount is not paid by the due date, a penal interest rate applies to the overdue amount until it is cleared. This is charged in addition to the regular interest rate.
Bounce Charges
Applied when the auto-debit instruction for the monthly interest fails. For example, due to insufficient funds in the linked bank account or a failed ECS mandate. This is a flat per-instance charge. On smallcase, this depends on your lender: ₹1,200 per bounce with Bajaj Finance, nil with South Indian Bank, and ₹500 + 18% GST per dishonoured or unregistered payment instruction with DSP Finance.
Demat Pledge Charges
Applied only when demat-held mutual fund units are pledged (as opposed to folio/SOA-based units). The charge is levied per ISIN (per unique security) per pledge request and not per unit. It is typically split between the lender and the depository participant.
Lien Invocation Charges
Applicable only when the lender liquidates (sells) the pledged mutual fund units, either due to an LTV breach that was not resolved, a default on repayment, or non-repayment at tenure end. This is a worst-case charge that applies to demat-held units.
Lien Removal Charges
The charge for releasing the lien on pledged units. On smallcase, this depends on your lender:
- South Indian Bank and DSP Finance: no lien removal charges after you take the loan.
- Bajaj Finance: demat pledge charges apply. Ad hoc requests are charged ₹390 to mark a lien and ₹118 to remove one, including taxes.
- Before disbursal (all lenders): if you cancel after pledging but before the loan is disbursed, the actual processing fee may be levied.
Stamp Duty
A regulatory levy on certain financial transactions. For LAMF, stamp duty applies on the lien invocation value, i.e., when the lender liquidates demat securities. The rate is 0.015% of the lien invocation value on smallcase. This charge is not applicable to non-demat pledges.
Collection and Legal Charges
Applied in cases of default where the lender needs to initiate recovery proceedings. Charged at actuals (i.e., the actual costs incurred). This is a last-resort charge relevant only if a loan becomes non-performing.
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To Wrap It Up….
The stated interest rate is the largest cost component in a LAMF, but not the only one. Processing fees, demat pledge charges, and penal interest on late payments all contribute to the effective borrowing cost. For borrowers who draw the full credit limit and hold it for an extended period, the processing fee becomes a relatively small portion of the total cost. For short-term, smaller draws, it is proportionally more significant.
On smallcase, the rate starts at 9.9% p.a. on the outstanding drawn amount with no foreclosure or prepayment charges. Always review the full schedule of charges in the loan agreement before signing, and use the APR (not just the stated rate) to compare products across lenders. You can review your eligible credit limit and applicable charges for a smallcase Loan Against Mutual Funds before applying.
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
Interest rates on a loan against mutual funds vary by lender, the type of funds pledged and the borrower’s profile. On smallcase, interest rates start from 9.9% p.a. and are charged only on the outstanding amount you have drawn. For current fees and charges, visit our help centre
Interest is calculated on a daily basis on the outstanding drawn amount, not on the full sanctioned credit limit. If you draw ₹50,000 from a ₹1,00,000 credit limit, interest accrues only on ₹50,000. The monthly debit is the sum of daily interest charges for the billing period.
No, there are no foreclosure or part-prepayment charges on smallcase. You can repay the loan in full or in part at any time. Interest stops accruing on the repaid amount from the date of repayment.
If the monthly interest auto-debit fails, a bounce charge of ₹1,200 per instance applies. Additionally, a penal interest of 1.5% per month is charged on the overdue interest amount until it is cleared.
Demat pledge charges apply only if you are pledging mutual fund units held in a demat account. On smallcase, this is ₹50 + GST (lender) and ₹32 + GST (Zerodha) per security pledged. If your mutual fund units are in non-demat (folio/SOA) form registered with Mutual Fund companies, these charges do not apply.
The stated interest rate reflects only the interest component. The Annual Percentage Rate (APR) includes the interest rate plus upfront fees such as the processing fee, stamp duty, and GST on charges, spread over the loan tenure. The APR is always higher than the stated rate. For larger loan amounts held longer, the gap between APR and stated rate narrows.
This depends on the lender. Bank-offered LAMF products are often floating rate, linked to MCLR or the repo rate, meaning the rate can change if the benchmark changes during the loan tenure. NBFC products may be fixed or floating. It’s important to confirm the rate type with your lender before signing the agreement.
LAMF is a secured loan because mutual fund units are pledged as collateral. This lowers the lender’s risk compared with an unsecured personal loan, where no asset is pledged. Due to this, LAMF interest rates are generally lower than personal loan rates.
Yes. You can topup your existing LAMF by pledging more mutual funds to become eligible for a higher loan amount. You can also topup your LAMF with a loan against stocks (LAS) by pledging your stocks. Although the application process for LAS and LAMF are separate, the loan account remains the same in case of topups. However, the availability of the topup feature varies from lender to lender so please read your loan agreement carefully to understand whether a topup is possible in your case.
