Get a Loan Against Mutual Funds

Selling your mutual fund investments might seem like the quick fix but hold on!  

A loan against mutual funds can give you the cash you need without letting go of your investments.  

For Indian investors, this is a smart way to manage short-term cash crunches while keeping your long-term financial goals intact.  

In this article, we’ll break down everything you need to know about how to get a loan against mutual funds in India 2025 with low interest, so you can make an informed choice. 

What is a Loan Against Mutual Funds? 

A loan against mutual funds is a secured loan where you pledge your mutual fund units as collateral to borrow money. Instead of redeeming your investments and losing potential returns, you let them stay invested while accessing liquidity.  

The lender, usually a bank or NBFC, offers you a loan based on the Net Asset Value (NAV) of your mutual funds. It’s like borrowing against your fixed deposit or gold, but with mutual funds, you continue earning returns even during the loan period.  

This makes it a popular choice for personal finance and debt management in India. 

Why Choose Loans Against Mutual Funds? 

Why go for a loan against mutual funds instead of a personal loan? Here’s the deal: 

• Lower Interest Rates: Since it’s a secured loan, interest rates are typically lower (8-15% p.a.) compared to personal loans (10-36% p.a.). 

• No Liquidation: Your mutual funds stay invested, so you don’t miss out on market gains or disrupt your SIPs. 

• Flexible Repayment: Most loans come as an overdraft facility, meaning you pay interest only on the amount you use, not the entire loan limit. 

• Quick Approval: With digital processes, you can get funds in as little as 10 minutes. 

• No Credit Score Hassle: Even with a low or no credit score, you can qualify, as the loan is backed by your mutual funds. 

For instance, imagine you need ₹2 lakh for a medical emergency. Instead of selling your mutual funds, you pledge them and get the cash while your investments keep growing. It’s a win-win! 

Understand How Loans Against Mutual Funds Work 

Here’s how it works in simple terms: 

1. Pledge Your Units: You select mutual fund units to pledge, which are marked with a lien (a legal hold) by the lender through registrars like CAMS or KFintech. This means you can’t sell those units until the loan is repaid. 
2. Loan Amount: You can borrow up to 50-75% of the NAV for equity/hybrid funds and up to 80-90% for debt funds, depending on the lender. 
3. Overdraft Facility: The loan is often provided as an overdraft, allowing you to withdraw funds as needed and pay interest only on the amount used. 
4. Repayment: Pay monthly interest via auto-debit (NACH mandate). The principal can be repaid anytime within the loan tenure, with no prepayment penalties in most cases. 
5. Lien Removal: Once you repay the loan, the lender removes the lien, freeing your mutual fund units. 

If the market dips and the NAV of your pledged funds falls, the lender may ask you to pledge more units or repay part of the loan to maintain the Loan-to-Value (LTV) ratio. 

Which Mutual Funds Are Accepted for Availing a Loan Against Mutual Funds? 

Not all mutual funds qualify for a loan. Here’s what’s typically accepted: 

• Equity, Hybrid, and ETF Funds: Up to 50-75% of NAV can be borrowed. 

• Debt and Fixed Maturity Plan (FMP) Funds: Up to 80-90% of NAV, as they’re less volatile. 

• Funds Registered with CAMS/KFintech: Most lenders accept funds from major AMCs like SBI, ICICI Prudential, HDFC, and others registered with these registrars. 

• ELSS Funds: Eligible only if the 3-year lock-in period is over. 

Check with your lender for their approved list of mutual funds. For example, Bajaj Finserv accepts over 5,000 funds, while Mirae Asset Financial Services covers a wide range of AMCs. 

What is the Tenure of the Loan Against Mutual Funds? 

The tenure varies by lender but is typically flexible: 

• Banks: Usually 1-3 years, with renewal options based on account performance. For example, ICICI Bank offers a 1-year tenure with renewal. 

• NBFCs: Often provide longer tenures, up to 3-5 years, with no fixed EMI for the principal. You pay only monthly interest and can repay the principal anytime. 

For instance, if you borrow ₹5 lakh from Mirae Asset Financial Services, you pay interest only on the amount you use, and you can settle the principal whenever you’re ready, within the agreed tenure. 

Eligibility for Taking a Loan Against Mutual Fund Units 

To qualify, you typically need to meet these criteria: 

• Age: 18-75 years (varies by lender). 

• Residency: Indian residents; NRIs may not be eligible for digital loans. 

• Mutual Fund Ownership: Units must be in your name, with identical PAN, email, and mobile number linked to your bank account and mutual fund folio. 

• Minimum Investment: A minimum value of mutual fund units (e.g., ₹20,000 for Fibe, ₹50,000 for HDFC Bank). 

• KYC Compliance: Valid PAN and Aadhaar, as per SEBI regulations. 

Some lenders, like Bajaj Finserv, also allow HUFs, companies, and trusts to apply, but individual applicants are more common for digital loans. 

Documents Required for Mutual Fund Loan Approval 

The process is largely digital, requiring minimal paperwork: 

• KYC Documents: PAN card, Aadhaar card, or other address proof (e.g., passport, voter ID). 

• Mutual Fund Statement: Latest statement showing units held, often fetched digitally via CAMS/KFintech with OTP consent. 

• Bank Details: Bank account number and a cancelled cheque for NACH mandate setup. 

For offline applications, you may need to submit a physical mutual fund statement or a loan agreement. 

Banks and NBFCs Offering Loans on Mutual Funds in 2025 

Here’s a quick look at some top lenders offering competitive rates in 2025: 

Note: Rates and limits may vary based on your credit profile and market conditions. Always check with the lender for the latest terms. 

What is the Process for Availing a Loan Against Mutual Funds? 

Here’s a step-by-step guide to get a loan against mutual funds: 

1. Log In: Access your bank’s internet banking, app (e.g., SBI YONO, ICICI iMobile), or an NBFC’s portal (e.g., Volt Money, Mirae Asset). 
2. Select Loan Option: Choose “Loan Against Mutual Funds” and enter your details (PAN, DOB, email). 
3. Fetch Portfolio: Your mutual fund details are fetched via CAMS/KFintech using OTP consent. 
4. Choose Funds: Select the mutual fund units to pledge and specify the loan amount. 
5. Complete KYC: Verify KYC using Aadhaar/PAN via DigiLocker or manual upload. 
6. Lien Marking: Authenticate the lien on your mutual fund units via OTP. 
7. Bank Verification: Provide bank details and set up an e-mandate for interest payments. 
8. Loan Disbursal: After verification, the loan amount is credited to your account, often within hours. 

The process is 100% digital with lenders like Volt Money and Mirae Asset, making it as easy as ordering food online 

Is a Loan Against Mutual Funds Better Than a Personal Loan? 

A loan against mutual funds often beats a personal loan for these reasons: 

• Lower Rates: Interest rates (8-15%) are lower than personal loans (10-36%). 

• No Credit Check: No need for a high CIBIL score, as the loan is secured. 

• Flexibility: Overdraft facility means no fixed EMIs, and you pay interest only on what you use. 

• Investment Continuity: Your mutual funds stay invested, earning returns. 

However, personal loans don’t require collateral, so if you don’t want to pledge your investments, they might be an option. Always compare terms before deciding. 

in closing 

A loan against mutual funds is a smart way to tackle financial emergencies without derailing your investment goals. With low interest rates, flexible repayment, and a quick digital process, it’s a game-changer for Indian investors in 2025.  

Whether you’re dealing with a medical bill or planning a big purchase, this loan lets you keep your mutual funds working while accessing the cash you need. Before you apply, compare lenders, check eligibility, and ensure your mutual funds are on their approved list. 

With the right approach, you can manage your personal finance like a pro and keep your investments on track. 

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