How to Get a Loan Without Liquidating Your Funds

How to Get a Loan Without Liquidating Your Funds
Need cash urgently but don’t want to sell your investments? Taking a loan against your mutual funds or other financial assets is a smart way to unlock liquidity without liquidating your holdings. Here’s how you can do it:

Step 1: Understand Loan Against Mutual Funds
This is a secured loan where your mutual fund units act as collateral.

The lender gives you a loan based on a percentage of the current value of your units.

You keep ownership of your investments and continue earning returns.

Step 2: Check Your Investment Eligibility
Verify if your mutual fund units are eligible for pledging (debt funds, some equity funds).

Ensure your KYC is updated with the mutual fund provider.

Step 3: Find a Lender Offering Such Loans
Look for banks, NBFCs, or fintech companies that offer loans against mutual funds or securities.

Compare interest rates, processing fees, loan-to-value (LTV) ratios, and repayment terms.

Step 4: Apply for the Loan
Submit your application online or offline.

Provide necessary documents such as KYC proofs, mutual fund folio details, and bank account info.

Step 5: Pledge Your Mutual Fund Units
The lender will electronically mark a lien on your mutual fund units.

Your units remain in your name but cannot be redeemed until the loan is repaid.

Step 6: Receive Loan Disbursal
Once approved, the loan amount (usually 60-80% of NAV) is transferred to your bank account.

Use the funds for your immediate needs without affecting your investments.

Step 7: Repay and Release the Pledge
Repay the loan as per the schedule.

After full repayment, the lien on your mutual fund units is removed, restoring your full control.

Why Choose Loan Against Mutual Funds?
Avoids selling investments at unfavorable times.

Keeps your portfolio intact and continuing to grow.

Typically lower interest rates than unsecured personal loans.

Faster approval due to secured nature of the loan.