Access Liquidity Without Selling Your Investments
Make Your Investments Work Around Your Needs
Your mutual fund investments may offer more than long-term growth potential. Subject to lender policies and eligibility, they can also serve as collateral for a loan when you need funds.
How Does It Work?
Eligible mutual fund units are pledged to a lender as security for a loan. The amount offered depends on factors such as the value and type of units, the lender’s loan-to-value limits, and your eligibility. The units generally remain invested, but restrictions may apply while they are pledged.
When Can It Be Useful?
A loan against mutual funds may help meet short-term liquidity needs, manage an unexpected expense, or cover a planned financial requirement without immediately redeeming investments. Whether it is suitable depends on your cash flow, repayment capacity, and the cost of borrowing.
What Should You Consider?
Review the interest rate, processing charges, repayment terms, eligible mutual fund schemes, and consequences of a fall in the value of pledged units. If you cannot meet the lender’s requirements, you may face additional obligations or the sale of pledged units, subject to the loan agreement.
Access Funds While Staying Invested
A loan against mutual funds can offer an alternative to redeeming your investments when you need liquidity. Understand the borrowing costs, collateral requirements, and repayment obligations to determine whether this option aligns with your financial needs.
Make an Informed Borrowing Decision
Retain Your Investments
Explore access to funds without immediately redeeming eligible mutual fund units, subject to the lender’s terms.
Understand Your Loan Eligibility
The loan amount depends on the type and value of your mutual fund holdings, lender policies, and applicable loan-to-value limits.
Evaluate the Cost of Borrowing
Compare interest rates, processing fees, repayment schedules, and other charges before accepting a loan offer.
Manage Collateral Risk
Market movements can reduce the value of pledged units. Understand the lender’s requirements and maintain a repayment plan.
