A Loan Against Mutual Funds is a secured loan option where investors can pledge their mutual fund units to secure funds for various financial needs without liquidating their investments. This option is ideal for those who want to meet immediate financial requirements while keeping their long-term investment goals intact. Loan amounts are typically calculated based on the current value of the pledged units, and these loans often offer flexible repayment options.

With a loan against mutual funds, borrowers can enjoy lower interest rates compared to unsecured loans, as the loan is backed by an asset. It provides the benefit of retaining ownership of mutual fund investments, which continue to earn returns during the loan tenure.

Advantages of Loan Against Mutual Funds:

• Quick and easy access to funds without selling investments.
• Competitive interest rates due to secured nature.
• Mutual funds continue to earn returns while pledged.
• Flexible loan tenure and repayment options.
• No impact on long-term financial goals.

Types of Loan Against Mutual Funds:

Loan Against Equity Mutual Funds
This type allows borrowers to pledge equity mutual fund units. The loan-to-value ratio (LTV) may vary, with lenders usually offering up to 50% of the fund's market value as a loan amount. The loan amount and terms depend on the risk associated with the underlying equity.

Loan Against Debt Mutual Funds
In this case, borrowers can pledge debt mutual fund units, which are considered less volatile compared to equity funds. As a result, lenders may offer a higher LTV ratio, often around 70-80%, making it an attractive option for conservative investors.