loan against mutual funds
Want to have quick money but are not willing to sell your investments? Now you can take a loan against mutual funds in minutes. This is an easy solution to receive money without parting ways with your mutual fund units. Increasingly, people are opting for this alternative instead of availing personal loans.
What is a Loan Against Mutual Funds?
A loan against mutual funds involves borrowing money and keeping your mutual fund units as security. You need not sell your mutual funds. You can still earn returns from them and also use the amount of the loan. Your units are held in lien by the lender. You cannot sell them until you have repaid the loan.
This loan is generally less expensive than personal loans or credit card loans. The rate of interest is lower. And the procedure is fast.
How Much Can You Borrow?
The amount you can borrow depends on the market value of your mutual fund units. You can receive up to 70%–80% of the market value of your fund. For example, if your mutual fund units have a value of one lakh rupeees, you can obtain a loan between seventy thousand to eighty thousands. Debt mutual funds provide more loan value compared to equity mutual funds. The lender verifies the type of fund prior to providing the amount.
How to Get a Loan Against Mutual Funds?
It is easy. The majority of individuals now apply using an instant cash loan app. You log in, choose the mutual fund, and apply for the loan. The app connects with your mutual fund account. Upon verification of your units, the loan is sanctioned.
You don’t have to provide many documents. PAN, Aadhaar, and a bank statement are generally sufficient. You also don’t have to provide your salary slip or ITR in most cases.
Who Can Take This Loan?
You can apply for this loan if you have mutual fund units in your name. It does not matter whether you are salaried or self-employed. As long as you possess mutual funds in your name, you can apply. The fund should be held in a demat or statement of account (SoA) format.
Even if your credit rating is not good, some lenders do give loans. This is because the mutual fund is used as collateral.
Loan Repayment
These loans are usually short-term. You can repay them in 6 to 12 months. Some lenders permit longer repayment periods. You can also pay the interest monthly and repay the whole amount later. Or you can repay both together.
You also have the facility to pay off early. Most lenders don’t charge you extra if you wish to settle the loan before the end of the term.
Taking a loan from mutual funds is a great choice. It’s quick, hassle-free, and does not hamper your savings. A cash loan app helps you procure the funds in minutes. When you own mutual funds and you require immediate cash, it ensures you are free from worry.
About the Author
