The Convenience of Taking Loan Against Mutual Funds

Learn how to access quick funds loan against mutual funds.
Leverage your mutual funds for a loan
3 minutes
25-June-2025

If you have invested in mutual funds to build long-term wealth, chances are you do not want to redeem them in a hurry especially when markets are low. But what if you are suddenly faced with an urgent financial need? This is where a loan against mutual funds (also referred to as loan on mutual funds or loan against MF) steps in as a reliable solution. It enables you to tap into the value of your portfolio and get funds quickly without selling your investments. This means your compounding returns stay intact, and you still get the liquidity to handle immediate obligations.

Need funds without touching your investments? Apply for a loan against mutual funds in minutes digital, flexible, and transparent.

Check eligibility criteria

Before you move forward, it's important to ensure that you meet the standard eligibility conditions for a loan against MF. While specific requirements can differ depending on the lender, most providers will expect you to:

  • Should be a resident of India
  • Age of at t least 18 years old
  • Should have mutual fund holdings (generally with a minimum value of Rs. 50,000 or higher)
  • Maintain a valid KYC record
  • Own mutual fund schemes that are listed and approved for pledging

Even if you are applying as a corporate, LLP, HUF, or trust, loans against mutual funds are still accessible under defined terms.

Not sure if you qualify? Check your eligibility instantly and see how much you can borrow no commitment required.

Evaluate loan amount eligibility

The amount you can borrow depends on the type and value of your mutual fund units. Mutual funds usually offer a loan-to-value (LTV) ratio up to 90% of NAV. So, if you hold mutual funds worth Rs. 5 lakh, you might be eligible for a loan of up to Rs. 4.5 lakh (depending on fund type and terms). Use this estimate to plan your finances.

Want to calculate your eligible loan amount? Try the loan against mutual funds calculator for an instant estimate.

Understand how loan against mutual funds works

Here is how the loan against securities mechanism works for mutual fund holders:

  1. You apply online and pledge mutual fund units as collateral.
  2. The lender places a lien (legal hold) on the units.
  3. Post verification, the approved loan amount is disbursed usually to your bank account.
  4. You repay through interest-only EMIs or full EMIs depending on the loan structure.

What is interesting is that your mutual funds continue to remain invested. You don’t lose out on potential market gains or dividend payouts (if applicable), even while using them to raise funds.

Example: Ravi, a 40-year-old marketing consultant, needed Rs. 3 lakh to fund his daughter’s admission abroad. Instead of redeeming his equity MFs, he pledged them and got a quick loan while his investments continued to grow during a market rally.

Gather the necessary documents

Applying for a loan on mutual funds is relatively hassle-free. However, keeping documents ready can help speed up the process.

Here is what you will typically need:

  • KYC documents (Aadhaar, Passport, or Voter ID)
  • PAN card (mandatory)
  • CAS (Consolidated Account Statement) showing mutual fund holdings
  • Recent photograph and digital signature, if required

Ensure all documents are updated and legible. In some cases, corporate applicants may need to furnish additional financials or board resolutions.

Submit the application

Once your documents are ready, visit the lender’s official site and head to the loan against mutual funds section. The application process is fully online, requiring just a few simple steps:

  1. Enter your personal and investment details
  2. Upload the required documents
  3. Authorise the lien creation digitally
  4. Choose the loan amount and tenure
  5. Submit the form and wait for approval

Most approvals happen quickly, and disbursal could take less than 24–48 hours in many cases.

Benefits of opting for loan against mutual funds

A loan against MF comes with several advantages that make it a preferred choice among investors:

  • No need to sell your funds to access cash
  • Quick processing and fast disbursal
  • Low interest rates compared to unsecured loans
  • Pay interest only on used amount (for overdraft facility)
  • Retain potential gains from your MF portfolio
  • Flexible repayment options
  • No foreclosure or prepayment penalty in many cases

This makes it a highly cost-effective and strategic way to meet your financial needs.

When is a loan against MF a smart choice?

Here are real-life use cases where a loan on mutual funds makes more sense than redemption or personal loans:

  • Medical emergencies or hospitalisation costs
  • Last-minute travel bookings or visa requirements
  • Child’s admission or tuition fees
  • Repaying high-interest credit card debt
  • Home repairs or temporary cash crunch in business

Instead of pulling out from long-term investments, you get to borrow against them often at better terms.

What to keep in mind before applying?

Here are a few practical tips:

  • Review which fund types (equity/debt/hybrid) are accepted
  • Use an online calculator to plan the EMI and tenure
  • Always borrow within your repayment capacity
  • Read the fine print—look for fees like processing or maintenance charges
  • Monitor your fund performance to avoid margin calls (in rare cases)

Being mindful of these aspects can help you use this facility responsibly and effectively.

Conclusion

A loan against mutual funds gives you the best of both worlds: immediate liquidity and long-term wealth preservation. Instead of disrupting your investment goals, you use them to your advantage raising funds without selling even a single unit. So, whether you are an individual investor or a business owner, this is a highly efficient and flexible way to raise capital when you need it most.

Need liquidity without losing your market position? Apply for a loan against mutual funds and make your investments work harder for you.

Disclaimer

While care is taken to update the information, products, and services included in or available on our application, website and related platforms, there may be inadvertent inaccuracies or typographical errors or delays in updating the information. The material contained in this site, and on associated web pages, is for reference and general information purpose and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Subscribers and users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions.

*Terms and conditions apply