Investments in mutual funds are crucial long-term securities. Depending on the type of fund you acquire, you may receive distributions of dividends, interest, capital gains or other income the fund earns on its investments. However, the financial crisis may attack any time. And it may not be a wise decision to withdraw the securities for financial aid.
Hence, most banks have initiated the facility of providing loans against mutual funds. The advantage of this initiative is that you don’t need to redeem your securities prematurely. The process is similar to an overdraft facility that banks offer.
You can avail loans against shares or mutual funds by approaching non-banking financial company (NBFC) or bank. The loan also ensures that your (Systematic Investment Plan (SIP) remains unaffected. For the bank to consider your credit request, you need to pledge your mutual fund units as security for the debt. The loan will be given based on the value of units in the folio and the tenure of your loan.
Eligibility and Documentation:
Individuals who are eligible for a loan against mutual funds include:
• Indian residents
• Non-residential Indian
• Sole proprietor
• Partnership firm
• Private limited company
• Member of a Hindu undivided family (HUF)
Note: Trusts and Minors are not eligible for loan against securities.
The following documents are required along with your loan application:
• Identity proof
• Address proof
• Signature Proof
• Proof of Income
• Bank Statement/Pass Book of last 6 months
• Latest statement of holding for mutual funds
• Pledge form for the creation of pledge
• Optional – Guarantor Form (Mandatory in case of joint holding
• If you are representing a company, you must submit your Income tax returns, an audited Balance Sheet and Profit & Loss Account for the previous two years.
Features and benefits of loan against mutual funds:
• You can get a loan up to 80% of the value of securities pledged
• You will be charged interest only on the actual loan amount you use. The interest rate will be calculated on the daily outstanding balance and debited to your account by the end of every month
• The loan process is transparent without any prepayment and foreclosure charges
How to apply for a loan against mutual funds?
Many online banking portals sanction loan quickly if you hold securities in the demat form. To avail the loan, simply log in to your Netbanking profile. Go to the Demat tab, click on Loan Against Securities, and select the shares that you'd like to offer as collateral from your Demat Account.
Hence, most banks have initiated the facility of providing loans against mutual funds. The advantage of this initiative is that you don’t need to redeem your securities prematurely. The process is similar to an overdraft facility that banks offer.
You can avail loans against shares or mutual funds by approaching non-banking financial company (NBFC) or bank. The loan also ensures that your (Systematic Investment Plan (SIP) remains unaffected. For the bank to consider your credit request, you need to pledge your mutual fund units as security for the debt. The loan will be given based on the value of units in the folio and the tenure of your loan.
Eligibility and Documentation:
Individuals who are eligible for a loan against mutual funds include:
• Indian residents
• Non-residential Indian
• Sole proprietor
• Partnership firm
• Private limited company
• Member of a Hindu undivided family (HUF)
Note: Trusts and Minors are not eligible for loan against securities.
The following documents are required along with your loan application:
• Identity proof
• Address proof
• Signature Proof
• Proof of Income
• Bank Statement/Pass Book of last 6 months
• Latest statement of holding for mutual funds
• Pledge form for the creation of pledge
• Optional – Guarantor Form (Mandatory in case of joint holding
• If you are representing a company, you must submit your Income tax returns, an audited Balance Sheet and Profit & Loss Account for the previous two years.
Features and benefits of loan against mutual funds:
• You can get a loan up to 80% of the value of securities pledged
• You will be charged interest only on the actual loan amount you use. The interest rate will be calculated on the daily outstanding balance and debited to your account by the end of every month
• The loan process is transparent without any prepayment and foreclosure charges
How to apply for a loan against mutual funds?
Many online banking portals sanction loan quickly if you hold securities in the demat form. To avail the loan, simply log in to your Netbanking profile. Go to the Demat tab, click on Loan Against Securities, and select the shares that you'd like to offer as collateral from your Demat Account.
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