Can mutual funds be used as collateral?

mutual funds

Can mutual funds be used as collateral?

Yes,  your Mutual Funds can be used as collateral against loans. These loans are called loan against securities/ LoanAgainst Mutual Funds units (LAMF). You can borrow money for short period instead of stopping Mutual Funds SIP or redeeming your Mutual Funds. You can avail a loan against mutual funds from Public sector banks, Private Banks and NBFC’s.

The interest would be around 10% – 13% depending on the bank and type of fund pledged.

You can avail loan only against the eligible Mutual Funds listed in the bank from which you are Borrowing. Banks don’t lend for subscribing another scheme of Mutual Funds.

You should send a letter to the Mutual Fund/ Registrar requesting to mark a lien on units in favour of the financer. Lien is a document that gives bank right of ownership to hold or sell funds. If you default the loan, lender can evoke the lien and recover the dues.

Mutual fund units pledged with the bank can’t be redeemed or switched, during the tenure of the loan, but the dividends earned would be credited to your account.

The amount of loan is linked to the Mutual Fund net asset value(NAV) and not to the face value. The extent of funding against Mutual Funds is around 40%-50% of  NAV.

Plan to tackle your day—and financial goals—with confidence. Invest in Mutual Funds at

About Author

Related posts

Instant Professional Loans India

3 Types of Instant Professional Loans Served in India

Professional Loans In the world of Credit, there are specially crafted loans for salaried or self-employed professionals. There will be some special privileges to these professionals.The following are the type of professional loans. Professional Loans for Doctors These Loans are precisely for Doctors. Primarily doctors choose these type of...

Read More
Mortgage Loan Online

6 Points to consider while applying for a Mortgage Loan

Mortgage Loan Meaning: The mortgage loan is the Loan in which the borrower uses real estate or property as collateral. The borrower makes an agreement with the lender and withdraws cash easily and then the repayment is set over a time period till he repays the whole to the...

Read More
home loan online

Know About Home Loan

Are you exploring options for home loans to buy a house of your dreams? In recent years, the banks have become more liberal in extending a helping hand to the people who are buying a home of their own. With the availability of several banks and varied interest rates,...

Read More

Leave a Reply