Are you in need of some urgent funds, and don’t want to liquidate your assets such as fixed deposit and mutual funds? Don’t worry, you can still get access to money without liquidating the assets and losing on the interest ROI.
Yes, it is possible as you can now apply for a loan against mutual funds and get a higher loan value from leading lenders.
The loan against mutual funds works as the deposited amount in the securities is kept as collateral to provide you money at a lower rate. However, before you apply for the loan against mutual funds facility, you need to know some aspects. Here we go:
In addition to the standard documentation such as address and ID proofs, every lender has an approved list of mutual funds that they can lend against. Thus, you need to know about the vital information about it and whether your mutual fund falls under the list. The standard documentation procedure for the loan against mutual funds is easy. Some lenders even let you submit the documents online. Some of the standard documents for the loan against mutual funds are:
- ID proofs such as Aadhaar Card, Driving License, and PAN Card
- Address proof such as Aadhaar Card
- Documented mutual funds proofs
- Recent pass sized colour photographs
Falling short of the eligibility may not see your loan against mutual funds facility getting approved. Hence, you should be aware of the eligibility terms of a lender that you wish to apply with. Some of the standard documents for applying for the loan against mutual funds are:
- The applicant needs to be a citizen of the Republic of India
- The applicant should be at least 21 years or more
- You should either be a salaried or a self-employed person with a consistent source of income
- The minimum value of the mutual funds against which you wanted to avail the loan facility should have a minimum face value of at least Rs.10 lakh
Another vital aspect of the loan against mutual funds facility is that the interest charges are applicable only for the money that is drawn on. Hence, the interest is calculated on a daily basis and debited to the current account opened for the purpose. Being a borrower, you would need to repay the amount to regularize the account after it gets debited.
Most of the leading banks and non-banking finance companies (NBFCs) provide the loan against mutual funds facility for 1 year. At the end of the duration, there is a provision to renew the account as well. If all conditions of the lenders are satisfied, you may also get it auto-renewed for another 1 year. It may continue to happen unless the loan borrower notifies the lender otherwise in writing or online.
Loan against mutual funds’ assigned limits
Most of the known lenders follow the rule of the lending high-value loan of the mutual funds’ next asset value (NAV). The terms and conditions of the lenders keep changing. Hence, it’s better to connect with your lender to be clear of the assigned limits.
Minimum and maximum loan limits
The minimum value of the portfolio needs to be at least Rs.10 lakh if you wish to apply for the loan against mutual funds. A large number of lenders offer a minimum loan amount of Rs.5 lakh and maximum up to Rs.10 crore.
Some of the relevant elements of the loan against mutual funds are now revealed to you. Applying for the loan against mutual funds will be a lot easier as you are aware of its vital aspects.