10 Key Benefits of a Loan Against Securities
In times of urgent need for cash, without proper emergency funds, liquidating assets is the first solution that comes to mind. However, withdrawing money from the corpus for which you’ve planned diligently can hamper your long-term financial goals. With smallcase, you can secure a loan by pledging your mutual funds while still retaining the ownership. In this article, we’ll explore the benefits of taking a loan against securities such as mutual funds on smallcase and why opting for one could be more beneficial to you and your portfolio.
What is Loan Against Securities (LAS)?
A loan against securities involves using your securities, such as mutual funds, as collateral to secure a loan. The lender can offer a loan based on the market value of the pledged acceptable and recognised assets.
How Does LAS Work?
Once you apply for the loan on smallcase, the lender will assess the value of your pledged assets—mutual funds. Based on this evaluation, the lender offers a loan amount, which is typically a certain percentage of the market value of the securities. However, there are certain benefits of availing a loan against mutual funds on smallcase.
Benefits of Loan Against Securities
Here are a few advantages of taking a loan against securities, such as mutual funds, at smallcase:
Lower Interest Rate
One of the key benefits of a loan against securities is the significantly lower interest rate compared to unsecured loans. By pledging securities such as mutual funds as collateral, the borrower mitigates the lender’s risk, making the loan less risky for the lender. As a result, borrowers enjoy a lower interest rate of 10.5% – 10.9% per annum.
Digital Process
There is no need to visit banks or engage with relationship managers. With smallcase, the entire process of availing a loan against mutual funds can be completed efficiently through a few simple steps on the mobile application.
Wide Range of Mutual Funds
You can check your eligible loan amount against any of the 7,000+ mutual fund schemes available.
Quick Disbursement
Once the application process is complete and the digital agreement is signed, the loan is disbursed within two working hours after approval.
Minimal Documentation Required
First-time investors simply need to provide their PAN card along with basic details like date of birth, mobile number, and email ID. No physical paperwork is involved.
Basic Eligibility Criteria
Applicants need to meet the basic eligibility criteria, such as being an Indian citizen between the ages of 18 and 70 with valid PAN card.
24×7 Access to the Account
With a loan on mutual funds, borrowers can access their loan account anytime, anywhere. This means you can monitor your loan status, check balances, or even contact the support team for assistance whenever needed.
Flexible Repayment Option
Another significant advantage of a loan against securities is the flexible repayment structure. Borrowers can choose to repay only the interest on the loan each month, thereby lowering their monthly EMI and improving cash flow management. Additionally, the loan can be closed early without any penalty charges for foreclosure, providing borrowers with the option to repay the loan before the full term ends.
Choose from a List of Approved Securities
Mutual fund houses partner with Registrars and Transfer Agents (RTAs) like CAMS and KFin (formerly KARVY). These RTAs facilitate lien marking on mutual fund units held in non-demat form, enabling you to avail a loan against them.
Maintain Ownership
By pledging your mutual fund units as collateral, you can secure immediate funds without liquidating your investments, allowing you to continue earning potential returns.
Learn more about some frequently asked questions around LAMF at smallcase.
To Sum Up…
A loan against securities offers several advantages, including lower interest rates, flexible repayment options, and the ability to retain ownership of your assets. Therefore, to apply for a loan against mutual funds, 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 About LAS
Taking a loan against securities can be a good option if you need liquidity without selling your investments. It offers lower interest rates compared to unsecured loans, but it also comes with the risk of losing your assets if you default on the loan.
The processing fee for a loan against mutual funds at smallcase is ₹999 or 1% of the loan amount, whichever is higher, up to a maximum of ₹4,999.
The main risk around loan against securities, including loan against mutual funds, is the potential loss of your pledged assets if you default on the loan. The value of the collateral could also fluctuate, and if the value drops significantly, you may be required to provide additional collateral or face liquidation of your assets.
The interest rate for a loan against mutual fund securities at smallcase is 10.5% – 10.9% per annum. This is lower than unsecured loan options, making it an attractive choice for borrowers who have securities to pledge.
The credit limit is calculated by taking a percentage of the current market value of the mutual funds you wish to pledge. This percentage is 45% for equity mutual funds and 75% for debt mutual funds.
Before applying for a loan against securities, consider the value of your collateral, the interest rates, repayment flexibility, and your ability to repay the loan. Additionally, assess your financial situation to ensure that taking this loan aligns with your long-term goals and cash flow needs.
To be eligible for a loan against mutual funds at smallcase, the following criteria must be met:
– Age: 18 to 70 years.
– Investor Type: Available only to individual investors (NRIs & HUFs are not eligible).
– Mutual Funds: Applicants can have eligible mutual fund units in non-demat form or demat form. However we currently only support demat mutual funds held in Zerodha accounts.
– KYC Compliance: A valid PAN and Aadhaar-linked mobile number are required.
