What is Loan Against Mutual Funds? Know How It Works

You have played the long game, invested regularly in mutual funds, and spent years carefully building the portfolio. It’s finally doing great, and things are looking good for the future. But life, as we know it, loves to throw surprises. You now suddenly need some cash just for a short while, and the last thing you want is to break your long-term investment. That’s where a loan against mutual funds can help. It lets you borrow money by using your existing investments as collateral. Even better, the process can now be fully digital. If this sounds like something you would want to explore, read this blog till the very end to know how these loans work and why it might be a smart move.

What is a Loan Against Mutual Funds?

A loan against mutual funds is a secured loan means you can take money from a bank or lender by keeping your mutual funds as a guarantee (called security). You don’t have to sell your mutual funds investments to get cash. Instead, you tell the bank, “These mutual funds are mine, I will keep them with you, and in return, please give me some money.”

It works like this:
Imagine you have a gold chain. Instead of selling it, you give it to a bank and take a loan. Later, you return the money, and the bank gives your chain back. A loan against mutual funds works in the same way.

Your mutual funds stay in your name and still earn returns. But at the same time, you get money to use for your needs—like paying school fees, handling a medical emergency, or managing business costs.

It’s a good option if you need money quickly but don’t want to lose your investment.

Benefits and Features of a Loan Against Mutual Funds

Why do so many investors choose a loan on mutual funds in India? Here are the top reasons:

• No need to sell your investments: Stay invested and continue to earn potential returns, even while you borrow.
• High Loan-to-Value (LTV) ratio: Get up to 50% of the Net Asset Value (NAV) for equity funds (with a max cap of ₹20 Lakhs) and up to 80% for debt funds.  
• Quick and convenient: Many lenders offer instant approval and disbursal, sometimes within minutes.
• Pay interest only on what you use: Most loans work as overdraft facilities. You’re charged interest only on the amount withdrawn and for the days you use it.
• Flexible usage: Use the funds for anything — business, education, emergencies, or even to grab a new investment opportunity.
• Competitive interest rates: Generally lower than unsecured personal loans or credit cards.
• No impact on SIPs: Your ongoing investments (SIPs) can continue as usual.
• Digital process: Apply, pledge, and manage your loan entirely online with minimal paperwork.

Who Can Avail a Loan Against Mutual Funds?

Eligibility is broad and straightforward:

• Age: 18–65 years (some lenders allow up to 70).
• Nationality: Indian residents; NRIs may be eligible with some lenders.
• Employment: Salaried or self-employed individuals, and in some cases, businesses and HUFs (for debt funds).
• Minimum fund value: Typically, your mutual fund portfolio should be worth at least ₹50,000.
• KYC compliance: Valid PAN, Aadhaar, and other KYC documents.

Note: Not all mutual funds are eligible. Lenders maintain an approved list, and the fund must be registered with their partner RTAs (like CAMS).

Documents Required for Loan Against Mutual Funds Online

Here’s what you’ll generally need to apply for a loan against mutual funds online:

• PAN card
• KYC documents (Aadhaar, Passport, Driving License, Voter ID, etc.)
• Recent passport-sized photograph
• Mutual fund holding/statement (Consolidated Account Statement)
• Bank account details
• Signature verification (if required)
• For non-individuals: additional financial statements and KYC

My Mudra accepts digital copies, making the process quick and paperless.

How to Get Loan Against Mutual Funds Online

My Mudra has a quick and easy 5–step process, from application to funds completely online within minutes. Here’s a simple roadmap:

• Apply online: Visit our website, fill out the application form, and set up your profile.
• Choose your lender: Compare interest rates, LTV ratios, and eligibility criteria.
• Upload documents: Fetch your portfolio. Submit your KYC and mutual fund statements digitally.
• Pledge your mutual funds: The lender will initiate a lien (pledge) on your units through the RTA.
• Loan approval and disbursal: Once approved upon verification, the funds are credited to your account within 24–72 hours.

The best part? The entire process can be completed in as little as 15 minutes.

EMI Calculator: Estimate Your Repayments

Before you take out a loan on mutual fund, it’s smart to know what your repayments will look like. That’s where My Mudra’s loan against mutual fund calculator comes in handy.

How does it work?
Just enter:

• The loan amount you want to borrow
• The interest rate offered
• The loan tenure (in months)

The calculator instantly shows your monthly EMI. This helps you plan your finances and compare offers easily. 

Pay interest only on the amount you use. Repay the principal as per the agreed terms and manage your finances efficiently using My Mudra’s EMI Calculator.

Example:
If you borrow ₹5 lakh at 11% for 2 years, your EMI will be calculated based on these inputs. You can adjust the amount or tenure to see how your EMI changes.

Why Choose a Loan Against Mutual Funds Over Other Options?

Key advantages:

• Lower interest rates than unsecured loans.
• No need to break your investments.
• Interest only on the amount used.
• Fast and paperless process.

Examples of Popular Providers of Loan on Mutual Funds

Many top banks and NBFCs offer loan against mutual funds online. Here are some leading names:

✔ ICICI Bank: Up to 50% (equity) or 80% (debt) of NAV; interest rates around 10.75%–11.75% p.a.  

✔ Axis Bank: Similar features; interest rates lower than personal loans; instant loan up to ₹2 crores. 

✔ SBI Bank: Offers loans against mutual funds up to ₹10 Lakh (equity funds) and ₹5 crore (Debt Funds) with competitive rates.  

✔ HDFC Bank: High Loan to Value (up to 80%), digital application and quick disbursal.

✔ Bajaj Finserv: Fully online process, flexible eligibility, and instant approval.

Always check the latest rates and terms on the provider’s website.

When Should You Consider a Loan Against Mutual Funds?

• Need urgent funds but don’t want to sell your investments.
• Want to avoid high-interest personal loans or credit card debt.
• Looking for a flexible, short-term financing option.
• Want to continue earning potential returns on your mutual fund portfolio.

Suppose you have ₹10 lakh in debt mutual funds. You need ₹7 lakh for a business opportunity. Instead of selling your funds (and losing out on future gains), you pledge them and get a loan at 9% p.a. You use the funds, repay the loan in a year, and your investments remain intact.

Conclusion

A loan against mutual funds is a smart, flexible way to get liquidity without interrupting your investment growth. It’s fast, affordable, and easy to manage especially when you apply online. Whether you’re facing an emergency, planning a big purchase, or just want some extra cash flow, this option keeps your financial goals on track.

At My Mudra, we help you get loan against mutual funds online quickly and transparently. Our experts guide you through every step, from checking eligibility to disbursal, so you can access funds without stress. Ready to explore your options? Apply with My Mudra today and experience hassle-free borrowing!