Can You Get a Loan Against Mutual Fund? – Eligibility, Process, & More
Applying for a loan in India has been one of the most challenging processes. The loan application process often requires extensive documentation and can be a lengthy approval process. If you’re looking for paperless and 100% digital process to apply for LAMF, then visit smallcase. At smallcase, you can simply opt for a Loan Against Mutual Funds (LAMF) at a competitive interest rate of 10.75% per annum without the hassle of providing extensive paperwork. The entire application, from KYC verification to lien marking of mutual funds and loan disbursal, can be completed online through the platform’s user-friendly interface.
Thus, in this blog, we will delve into how to apply and who can apply for a digital loan against mutual funds.
What is a Loan Against Mutual Funds?
Loan Against Mutual Funds or LAMF is a secured loan where borrowers can pledge their mutual fund units as collateral in exchange for funds. The lender marks a lien on the pledged mutual funds, meaning you cannot sell/redeem your mutual fund holdings before repayment. Thus, with relatively lower interest rates and flexibility options compared to traditional loans, LAMF empowers borrowers to meet their financial needs without liquidating their investments.
At smallcase, you can easily avail a digital loan against mutual funds within 5 minutes while pledging your mutual fund units. The best part of availing LAMF via smallcase is the lower interest rate, i.e. 10.75% p.a., which is lower than other traditional loans. Apart from this, you can also learn more about its benefits and features by reading our learn article on ‘LAMF Features and Benefits’.
How Can I Apply for a Loan Against Mutual Funds Online?
Rather than getting a loan against shares or bonds, you can consider getting a loan against mutual funds. Thus, at smallcase, we offer a hassle-free online application process if you wish to opt for LAMF. Since it’s a 100% digital and paperless process, here is a step-by-step guide for you:
- Visit the smallcase app and log in with your credentials.
- Go to the ‘More’ section of the smallcase app and click ‘Loan Against Mutual Funds’.
- You can select and import the mutual funds that will be pledged as collateral.
- Add a bank account to receive funds and set up monthly interest auto-debit.
- Pledge your MFs and sign the online mutual fund loan agreement to complete the process. Once the verification is completed, funds will be credited to your account in just two hours.
Note: Once pledged, you will continue to earn returns but won’t be able to sell or redeem your mutual fund units before the loan is closed. Additionally, the monthly interest will be automatically deducted from your provided bank account.
Who Can Apply for Digital Loans Against Mutual Funds?
LAMF is available to various individuals seeking quick and convenient financing options. So, let’s look at the digital loan against mutual funds eligibility criteria and some of the common guidelines that one should be aware of.
Applicant’s Indian Citizenship
Indian citizenship is the primary requirement for applying for a digital loan against mutual funds. This means if you are considering applying for a loan against mutual funds, you must be an Indian citizen.
Age Requirement
While the exact age range differs between lenders, they all have a minimum age requirement of 18 years old. However, at smallcase, you can apply for LAMF if you’re 18 to 70 years old.
Type of Borrowers
There are no restrictions on your profession or business when getting a loan against mutual funds. Whether self-employed or salaried, you can use your equity and debt funds as collateral.
Loan Amount Limits
The loan amount for LAMF comes with specified limits and varies based on different lenders. However, at smallcase, the minimum loan amount available against MFs is Rs. 25,000, while the upper limits are set at Rs. 5,00,00,000. You can avail up to 45% for equity MFs and 75% for debt MFs.
Approved Mutual Funds Held with CAMS & KFintech
With over 6000+ mutual funds, borrowers can opt for a digital loan against mutual funds. At smallcase, borrowers can only pledge against the mutual fund units that are currently registered with CAMS and KFintech. Here is a list of eligible mutual funds that you can select to pledge. You can also check out our article on ‘LAMF Eligibility and Documents’ to get valuable insights about the eligibility and required documents when opting for a loan on smallcase.
To Wrap It Up…
To conclude, availing a loan against mutual funds can be a convenient and cost-effective way for investors to access funds while keeping their long-term investment plans intact. By pledging their mutual fund units as collateral, borrowers can obtain loans at lower interest rates compared to unsecured loans like personal loans, auto loans, and consumer loans. One can opt for a loan by meeting the eligibility criteria and keeping certain guidelines in mind that we have discussed above. So, get funds credited to your bank account against pledged mutual funds in just 2 hours by opting for LAMF via smallcase.
Frequently Asked Questions About Who Can Take Loan Against Mutual Funds
While the loan limit varies from lender to lender and is based on the value of your mutual funds used as collateral. However, at smallcase, you can avail a loan against mutual funds interest rate of 10.75% p.a. for the loan amount from Rs. 25,000 to Rs. 5,00,00,000. As always, it is advisable to check with your preferred lender before opting for a loan.
Yes, if you meet the eligibility criteria, the application process for LAMF via smallcase doesn’t take more than 5 minutes. With minimum documentation, it is relatively easy for many to pledge their mutual fund units.
Yes. You can opt for a digital loan against mutual funds via smallcase. It is a 100% digital and paperless process which helps borrowers to apply for a loan without submitting a list of documents.
The exact loan term depends on the lender’s policies and the borrower’s repayment capacity. Thus, at smallcase, the default tenure of the loan is 36 months. During this period, one can make part-prepayments and close the loan early with zero foreclosure charges.
While you can apply for LAMF via smallcase, pledging smallcase investments as collateral isn’t admissible yet. You can only opt for a LAMF by pledging your mutual fund investments as collateral. Additionally, the interest rate will be only applied to the utilised amount.
All About Loan Against Securities & Loan Against Mutual Funds on smallcase –
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