How to Get Loan Against Mutual Funds

Many people invest in mutual funds to build wealth over time. But emergencies don't come with a warning. That is where a loan against mutual funds comes in. It’s a smart, flexible option that helps you borrow without breaking your portfolio.

So, let's explore how to get loan against mutual funds. Who is eligible, how it works, and why more people are choosing this over traditional personal loans. 

Loan Against Mutual Funds

A loan against mutual funds is a type of secured borrowing. Here, your mutual fund units are pledged as collateral. You continue to hold the funds, but they’re locked or marked under a lien during the loan period. The lender doesn’t sell them unless you default. 

Since an asset backs the loan, interest rates can be lower than unsecured loans. It's a smart way to get quick access to funds without needing to disturb your ongoing investments. More people today are learning how to get loan against mutual funds as a practical way to raise money without losing their long-term investments.

Why Consider This Loan Option?

This type of loan is becoming increasingly popular. These are the several reasons:

• You can pledge your mutual funds instead of selling off. And they can still earn returns or dividends. It keeps your long-term goals on track. 

• Since your mutual funds act as collateral, the lenders face less risk. It often results in better interest rates compared to unsecured loans.

• With digital platforms and fintech apps, approvals are often quick. Sometimes, even instant.

• There are no restrictions on how you use the funds, whether it’s for personal needs, a business requirement, medical urgency, or education.

• Many lenders offer an overdraft-style facility. So, you're charged interest only on the amount you actually withdraw, not the full sanctioned limit.

If you're unsure where to begin, learning how to take loan against mutual fund schemes through reliable platforms like My Mudra can make things much easier.

How to Get Loan Against Mutual Funds?

Understanding how to take loan against mutual fund investments can make the process seamless and easy. Here’s how the process works:

Step 1: Eligibility

You must be an Indian resident or an NRI with mutual fund holdings in your name. Most lenders allow both individual and joint holdings.

Step 2: Choose the Right Lender

Banks, NBFCs, and fintech partners like My Mudra offer digital loans against mutual funds. Each has its own list of approved mutual funds and terms, so compare wisely.

Step 3: Pledge Mutual Fund Units

Once you apply, you’ll be asked to pledge your units via CAMS or Karvy. You will receive a lien confirmation after a successful pledge. No physical documents are needed if you opt for a digital journey.

Step 4: Get Loan Approval

After the lien is confirmed, the lender will approve and disburse the loan to your bank account. Many platforms offer same-day disbursal.

Factors to Consider Before You Apply

Borrowing against mutual funds sounds easy. But being aware of some points can make your experience smoother.

1. Market Volatility

If the value of your mutual funds falls sharply, your lender may issue a margin call. This means you'll have to repay a portion of the loan or add more funds to maintain the required collateral.

2. Loan Tenure and Limits

Tenure usually ranges from 1 year to 3 years, and it can also be extended. The loan amount sanctioned is usually 50% and 70% of the value of equity mutual funds and up to 85% for debt funds.

3. Asset Eligibility

Not all mutual funds qualify. ELSS funds (tax-saving funds) and closed-ended schemes are often not accepted as collateral.

4. Interest Rates

Interest rates for loan against mutual funds typically range between 9 to 12% per annum. Factors that affect the final rate include:

• Type of mutual fund (debt or equity)

• Loan amount

• Your credit score

• Tenure selected

Other charges may include processing fees (usually up to 1% of the loan amount), renewal charges, and foreclosure fees in some cases.

Benefits of Choosing My Mudra

At My Mudra, we understand that emergencies and opportunities don’t wait. Our platform makes the borrowing experience fast, secure and transparent:

• Apply online in just a few clicks

• Compare top lenders offering digital loan against mutual funds

• Minimal paperwork and zero physical branch visits

• Expert guidance throughout the process

• Competitive interest rates and no hidden charges

Documents Required for Loan Against Mutual Funds

Most lenders offering digital loan against mutual funds ask for minimal documentation. You typically need:

• PAN card

• Aadhaar card or other address proof

• Bank account details

• Mutual fund folio number

• Recent income proof (in some cases)

Tips to Maximise Loan Approval

• Maintain a good credit score

• Don’t pledge highly volatile equity funds

• Keep your KYC details updated

• Go for debt funds to get a higher loan-to-value ratio

• Opt for a trusted platform like My Mudra for a simplified process

• Understand how to get loan against mutual funds before applying to improve your chances of approval

Summing Up

When you understand how to get loan against mutual funds, you unlock a powerful financial tool. It gives you flexibility, control and access to funds without breaking your investment momentum.

Whether it’s an emergency, a business need, or a big purchase, a digital loan against mutual funds offers a smart way to stay financially strong. And with My Mudra, the process becomes effortless. Apply now and borrow without compromise.

Also Read:
- Where to Buy Direct Mutual Funds
- Top 10 Best Mutual Funds in India 2025