What Are Loans Against Mutual Funds?
Mutual funds are an assortment of digital securities investment which includes assets such as:
- Money market instruments
- Equity funds
- Gilt funds and much more
Now if you possess such digital securities above or mutual funds, certain lenders such as Abhiloans, for instance, can give you a cash loan where your mutual funds units act as the security in this case. This type of loan arrangement is what qualifies as a loan against mutual funds. You don’t actually give away your mutual funds, rather they are held temporarily by your lender as you get the funds you need.
How Does a Loan Against Mutual Funds Work?
Your mutual funds unit act as collateral for the loan you’ll receive, the exact sum usually being a percentage of the value of the total units you’ve leveraged as security or collateral. Of course, the size of the loan you’ll get will depend on:
- The type of lender you approach
- The number of units you offer
- Varying company, lender, and bank policies.
Most lenders will give you an average of 50% of the value of your mutual fund units. However, here at Abhiloans, we provide excellent MF to loan value of up to 75% or more. This ensures a digital loan starting from 15K with excellent value across the board, all the way up to our 10 lakh offering. Moreover, with a loan against mutual funds arrangement from Abhiloan, you can pay only the interest you owe each month.
During your loan period, your mutual funds will keep on reeling returns so you do not lose your ROI as your assets remain invested. However, during this time you cannot sell the mutual fund units as you will have signed a lien transferring temporary possession to your lender.
How Can We Take Loans Against Mutual Funds?
The process differs from one lender to the next, but typically you’ll need to submit KYC documents and, once you’ve fulfilled your eligibility requirements, the loan is disbursed to you. Here’s the process on how you can take a loan against mutual funds from Abhiloans:
- Fill up your KYC documentation or submit existing files
- Via CAMSx, mark a temporary lien on your units
- Have your application quickly processed & approved
- Abhiloan disburses the cash to your account within 24 hours
Advantages of Taking Loans Against Mutual Funds
Loans against mutual funds have many benefits, a few of which include:
- No prepayment charges
When you take out a loan against mutual fund units from Abhiloans, you can repay it when you want. You don’t have to wait out the entirety of your loan tenure as some unscrupulous providers enforce. Pay when you want, without having to fork out any extra expenses in the way of prepayment charges.
- You can pay only interest, which is very low
In general, compared to personal finance loans & credit card loans as well, loans against mutual funds tend to be way cheaper and are thus easier to service. It gets even lower with Abhiloans, which offers interest rates that can reach as low as 13%.
- Instant availability of loans
If you want quick money on mutual funds, then this is the way to go. Abhiloans has fully digitalized and streamlined its disbursal process so that the money is available for use in just 24 hours. This instant loans’ availability makes loans against mutual funds convenient for sudden emergencies and also when you need quick business capital.
- No bad profile discrimination
Many individuals who have a poor credit history have consequently been blacklisted by the credit bureau and can’t access loan services. Abhiloan’s loan against mutual funds is however open to all, which ensures anyone can use and benefit from these services regardless of their credit history.
Things To Note Before Taking Loans Against Mutual Fund:
- Loan limits & value
It’s important that you talk to your loan against mutual funds provider so you’re quite clear on the loan value amount. As we’ve mentioned, most companies will give you 50% of the value of your mutual fund units, while Abhiloans can get you up to 75%. In the same breath, it’s worthwhile to figure out loan ranges. Some lenders require that you take a minimum amount that may be too high, which may be an inconvenience if you’re keen on a smaller amount.
Fortunately, Abhiloans offers highly flexible ranges, with a loan starting from 15K and transcending all the way to 10 lakh. This accommodates both small and big borrowers.
- Eligibility concerns
Of course, eligibility requirements also vary across the board. At Abhiloans, we seek to make the process an easy and hassle-free one, and as such, we require only that:
- Your mutual fund units are in CAMS
- Your mutual fund units are single-held
That’s it. Also, in terms of documentation, we’ll need your KYC documents, Aadhaar and Pan Card. The great news is that it’s a fully digital process so it’s fast and you can get a quick loan on mutual funds.
- Loan tenure
Loan tenure refers to the amount of time you get to repay your loan. It’s important that you’re on the same page with your provider before you give the green light. At Abhiloans, we offer flexible loan tenors of 12 months which gives you lots of breathing space to meet your emergencies, maintain your lifestyle, and pay later at a comfortable pace to you.
If you need money fast for whatever reason, but do not want to sell or liquidate your hard-earned shares, loans against mutual funds can bail you out. Here, you retain your investment, still earn your market profits, get the money you require, and only pay the interest you owe. The best part is that it is a quick process, sweetened by low-interest loans that are fully digital. There aren’t any manual processes with Abhiloans, making it the best option if you’d like to apply from home for mutual fund loan. Call us today to get instant business capital and money to take care of urgent needs.