Do You Really Need a Loan Against Your Mutual Funds? This Will Aid in Your Decision-Making!

Do You Really Need a Loan Against Your Mutual Funds? This Will Aid in Your Decision-Making!

So, you’ve decided to take on a loan against your mutual funds. Congratulations on making such a responsible and strategic decision! 

On any day, a secured loan is a better solution than choosing the unsecured loan options considering the pros and cons. Before you proceed with the decision, it’s important to understand the risks involved. If you’ve made up your mind, then read on to discover everything you need to know.

Abhiloans is a product of KNAB Finance Advisors Private Limited, a regulated NBFC registered with RBI, and offers you insights that can help in decision-making towards choosing a loan against Mutual funds

What Do You Need to Consider Before Taking on a Loan Against Your Mutual Funds?

The decision to take out a loan against your mutual funds is an important one. You need to consider all the potential advantages and disadvantages before making your decision. With that in mind, let’s look at some of the important things you need to consider.

  • Interest Rates

When taking out a loan against mutual funds, a borrower should consider the interest rate that will be levied. Fortunately, there are many options available that can be facilitated by Abhiloans customer support. 

It is worth bearing in mind that Loan against securities would almost always be a borrowing with a lower rate of interest compared to unsecured loans. As a result, such loans could be a great way to save money in the long run.

  • Fees and Costs

In addition to interest rates, you also need to consider all the fees and costs associated with your loan against mutual funds. These can include origination fees, processing fees, and other administrative costs. 

Make sure that you understand what you’re being charged for before signing any agreements. This will help you to avoid unexpected charges later.

  • Loan Term

One of the most important things to consider is the loan term. This refers to the length of time you will be required to repay the loan. Some loans can be repaid quickly while others may have longer repayment periods. 

It will make a lot of sense to weigh the pros and cons of each option before deciding on a particular loan term. This will give you a better idea of which one will be right for you.

  • Penalties and Early Repayment Charges

Another important thing to consider is the penalties and charges for early repayment of your loan. In some cases, you may be required to pay additional fees for paying off your loan early. 

Take care to understand all these details before signing an agreement. This will ensure that you avoid unnecessary costs down the road.

How it Affects your Investment Portfolio

Finally, it’s important to consider how the loan will affect your investment portfolio. While a loan against your mutual funds does come at a lower rate of interest compared to unsecure loans, it also leads to those funds being locked i.e it is mortgaged. This could make it difficult to divest from the fund in case there is a drastic drop in the fund’s valuation, incurring a loss for the holder. 

Making changes to the overall composition of your total portfolio may not be very easy given that a part of it is inaccessible through the duration of the loan taken against it.  

Factors that could influence the loan on Mutual funds that shall be offered by the Abhiloan’s distribution partners. 

  • Interest Rates: Your credit score will determine what type of interest rate you receive when you apply for your loan. Those with good credit may receive a lower interest rate than those with bad credit.
  • Loan Length: Flexible options for the selection of loan tenure
  • Nature of the loan against Securities available as collateral

Choosing the right kind of service providers like Abhiloans to help in processing the loan against mutual funds can help in the approval and disbursal of loan amounts quickly.