Introduction
A Loan Against Mutual Funds (LAMF) is a secured loan where investors pledge their mutual fund holdings to get funds. The interest rate on such loans is much lower than unsecured options like personal loans, making it an attractive option for borrowers in India.
But what determines the interest rate on a loan against mutual funds? Which banks and NBFCs offer the best rates? And how can you get the lowest rate possible? Let’s dive in!
What is the Interest Rate on a Loan Against Mutual Funds?
The interest rate on a Loan Against Mutual Funds depends on several factors, including:
- Lender’s Policy (Banks vs. NBFCs)
- RBI Repo rate
Typically, the interest rate on LAMF loans in India ranges between 7% and 11% per annum, which is significantly lower than personal loan rates.
📌 Related: Loan Against SIP – Is It Right for You?
Loan Against Mutual Funds Interest Rate Comparison (March 2024)
| Lender | Interest Rate (Per Annum) | Processing Fee (exc GST) | Max Loan Amount |
| HDFC Bank | 11.50% – 12.50% | ₹1,999 | ₹10 Crore |
| ICICI Bank | 12.00% – 12.50% | 1% of Loan | ₹5 Crore |
| Yenmo | 10.00% – 10.50% | ₹999 | ₹5 Crore |
👉 Note: You can get a higher loan amount on debt mutual funds, because they are less volatile compared to equity mutual funds
📌 Related: Loan Against Mutual Fund Eligibility
Factors Affecting Interest Rates on Loan Against Mutual Funds
1️⃣ Lender’s Policy
- Every lender has a different policy when deciding the interest rate for a loan
- However the interest rate for a LAMF would be lower than the personal loan interest within the same lender
2️⃣ RBI Repo Rate
- Most loans are linked to the Repo rate set by RBI and they may increase or decrease based on movement in this rate
- Increase in Repo rate would increase the interest, while a decrease in repo would reduce the interest rate
How to Get the Lowest Loan Against Mutual Funds Interest Rate?
🔹 Compare lenders before applying (Banks vs. NBFCs).
🔹 Try to pledge a larger amount, generally banks/nbfcs can offer a reduction if you open an account for over Rs. 1cr
🔹 Check to see if the lender has any offer running that offers a referral bonus or cashback on processing fees
📌 Pro Tip: Try using the Yenmo app to view all your investments in one place and check your interest rate instantly
📌 Related: Loan Against Mutual Funds Online – Apply Instantly
Loan Against Mutual Funds vs. Personal Loan – Which is Better?
| Feature | Loan Against Mutual Funds | Personal Loan |
| Interest Rate | 10% – 11% | 12.50% – 25% |
| Collateral Required? | ✅ Yes (Mutual Funds) | ❌ No |
| Approval Time | Instant – 24 Hours | 1-3 Days |
| Max Loan Amount | ₹10 Crore | ₹50 Lakh |
| Best For | Lower interest financing | Urgent cash needs |
📌 Verdict: If you have mutual funds, a Loan Against Mutual Funds is a cheaper and smarter choice than a personal loan.
Conclusion
A Loan Against Mutual Funds is an excellent option for those looking for low-interest financing without selling their investments. By choosing the right lender and mutual fund type, you can secure an interest rate as low as 7% per annum.
💡 Want to apply for a Loan Against Mutual Funds? Check out our Loan Against Mutual Funds Home Page for a complete guide and application process! 🚀
