One indirect benefit of an increase in Investment opportunities is that the investors can today also avail a loan against the mutual funds, bonds and shares they own and invest in. The amount that you get a loan is lower than the actual market value of the investment/units that are held by the loanee (known as margin or haircut).

Anyone would like to avail a loan at low-interest rates and the loans against mutual funds are benefiting in this regard. But while the loan against mutual funds units and holdings has a low-interest rate you, need to handover the assets (known as collateral). Here are some points that you must consider and evaluate before actually taking a loan against mutual funds, as these aspects have an impact on the interest rates of the loan.

Cross Check The Eligibility

Not all Mutual Funds are eligible for loans. Therefore you need to check the eligibility conditions laid by the particular financial institution from which you are trying to get a loan against mutual funds. The better mutual funds are highly valued and you get loans at lower interest rates for them.  Interest rates are the highest for risky funds.

Value Of Your Mutual Fund

Interest rates for home loans are subject to the market value of the mutual fund. You can get a loan easily when your mutual fund units have a good value, as these loans are deemed to be of less risky nature by the financial institutions.

Prepayment

Prepaying the loan against mutual funds is always a better option when you are seeking affordability and saving of costs. Whenever possible, repay the loan early so as to save cost and the interest rates that you would otherwise pay each month.

Credit History

The repayment and credit history (CIBIL score) also have an impact on the ease with which you get the loan. The better your credit history, the more likely you are to get the loan easily. A Credit score of 750 or above is good.

Comparison

You should check and compare the interest rates a few financial institutions and from which you decide to get a loan against Mutual Fund. The comparison can bring to you options towards getting your loan at a lower interest rate.

You can choose from a wide range of loan options today including the business and personal loans, and also get a loan against your shareholding. The processes are now more hassle-free and consume least of time.

To know more about the loan against mutual funds facility, click here: Borrowing a Loan Against Mutual Funds at a Lower Rate Made Easy

If you ever planned on taking a loan or already have one on your name, you must be aware of the term mortgage. If you have no clue about it, mortgage refers to a legal agreement between a lender and a borrower. The lender (can be a bank, NBFC or a private financer) temporarily takes the title of the debtor's property with the condition that the conveyance of title becomes void upon the payment of the debt.

Now, a mortgage loan can be of different types. To name a few, Indian banking ecosystem has the following mortgage loan options:-

1. Loan against property, commonly misunderstood as mortgage loan whereas it’s just a type. 
2. Home loan - the property being purchased is taken as collateral for the loan. 
3. Loan against securities - the recent addition to an already wide category, allows borrowers to take a loan against mutual funds, share market bonds or any other security. 

Assuming we all are well aware of the first two options; we’ll talk a little about the third option. Accordingly, loan against mutual funds/ shares/ other securities allows people to mortgage their securities and borrow a loan against it.

Loan Against Mutual Funds

Key features of loan against securities:-

1. Loan amount varies as per the maturity value of securities subject to the maximum specified by the lender. 
2. Interest rates are lower given the presence of security.  
3. Your investment maturity value remains unhampered.    
4. Lastly, you get a good amount of time for repayment along with end-usage flexibility. 

Thus, if you’re ever stuck amidst a cash crunch and don’t have plans to liquidate your savings, loan against mutual funds is your best sidekick. 

To know more about the loan against shares and funds, click here: How to Use Mutual Funds and Shares as Collateral for a Loan

There arise many instances in our lives wherein we require funds on a short notice but we do not have the requisite amount in our savings. The emergency is of such a pressing nature that we cannot wait for a bonus or salary hike and the assets cannot be liquidated on such a short notice. Despite this many individuals go ahead and sell their assets at a loss and lose ownership as well.

What such people do not know is that instead of selling off their high-value investments such as mutual funds, they can apply for a loan against it. This not only helps in retaining ownership but they also continue to earn interest for the period during which they are pledged as a collateral.

Availing Loan Against Mutual Funds

There are a number of financial institutions including NBFCs (Non-Banking Financial Companies) which offer loan against mutual funds at nominal rates. One of the biggest benefits provided by NBFCs is that of the sanctioned amount, you have the liberty to use as much money as you require and pay interest only for the part that is used. This greatly reduces the installment which is paid each month.

Loan Against Mutual Funds

The process of application is very easy. Here’s how you can do it - 

1. Apply for the loan online
2. Fill out the application form with the basic details
3. A confirmatory text will be sent along with an email regarding the status
4. Next, a representative will visit you to complete the process and gather documents
5. Once your documents have been verified, the funds are disbursed in a very short span of time. 

You can also track the disbursal of the loan from the online account which is provided to you.

To know more about this loan facility, click here: How to Avail a Loan Against Mutual Funds