The Ultimate Guide For Getting Loans Against Mutual Funds
All of us desire flexibility when it comes to handling our money. Envision having instant access to money without having to sell your investments. Sounds perfect, doesn’t it? This is where exactly the idea of an instant loan against mutual funds is advantageous. But what does that actually mean, and exactly how can you take advantage of it? Let’s go specific and examine how you might use your mutual fund investments to their full potential without disposing of them in order to obtain the necessary financial help.
What is meant by “loan against mutual funds”?
Let’s begin by setting a strong foundation and understanding what a loan against mutual funds is. A loan against mutual funds is a kind of secured loan where your mutual fund units serve as collateral. Basically, you mortgage your mutual fund shares to a banking or non-banking lending company (NBFC) like Yenmo in order to obtain a loan. The amount you can borrow completely depends on the current value of the mutual fund investment portfolio you own and the financing institution’s policies. This type of loan is quite attractive since it allows you to access the actual market value of your assets without needing to sell them.
What makes a mutual fund loan a good idea?
Now that the basics are clear, let us dive into the specifics. Choosing a loan on mutual fund investments could be a fruitful financial decision for several reasons:
- Retain Asset Ownership: You are not required to dispose of your mutual fund shares. This implies that whatever dividends or capital gains that your money may accrue continue to benefit you.
- Fast and Simple: Obtaining an instant loan against mutual fund holdings, such as those offered by Yenmo, typically takes less time than a regular loan.
- Discounted interest rates: Since the loan is backed by your mutual funds, the interest rate is typically cheaper than that of unsecured debts. Yenmo offers competitive rates.
- Multiple repayment choices: You can select a repayment period that fits your budget, with flexible terms.
- No prepay charges: Lenders like Yenmo do not impose prepayment penalties, allowing early repayment without extra fees.
How to Apply for a Loan against Mutual fund?
The following easy steps must be followed in order to obtain a loan in favor of mutual funds:
- Put your investment portfolio up as collateral by authorizing a lien on mutual fund units.
- The lender evaluates the value of the investment and approves a loan based on a percentage of that value.
- The loan amount is deposited into your bank account, often within 24 hours.
- Repay via EMIs, while continuing to earn returns on your pledged mutual funds.
What are the disadvantages of Loan against mutual funds?
Even with many advantages, there are a few important things to consider before opting for this loan:
- Market volatility: Equity mutual fund values may fluctuate. A significant drop might prompt the lender to request additional collateral or partial repayment.
- Not all mutual funds would be eligible Funds such as an ELSS fund, or a fund that has a lock in period might not be eligible for being pledged, which would reduce the amount of loan you can get
How to choose the right loan against a mutual fund?
For a fast loan on mutual funds, follow these tips:
- Examine interest rates: Compare offers and choose the most favorable terms.
- Check the LTV ratio: A higher loan-to-value (LTV) ratio means you can borrow more.
- Look out for hidden fees: Some lenders may charge extra. Yenmo has no processing or prepayment fees.
- Check if they accept demat based mutual funds:. Most companies only offer a loan against SOA based mutual funds, and do not accept Demat based investments. Yenmo however aceepts both SOA and Demat based funds
Conclusion
Obtaining a quick loan over mutual funds can be a smart move if you want to unlock funds without disturbing your investment strategy. With benefits like lower interest rates, flexibility, and continuous ownership of assets, it’s a reliable option during financial crunches.
However, consider your long-term goals and assess the pros and cons before making a decision. Platforms like Yenmo make the process easy, fast, and affordable — helping you make the most of your investments when you need it the most.
