Loan Against Mutual Funds – Instant Liquidity Without Redeeming Your MF
Selling off a mutual fund holding just to raise short-term cash comes with trade-offs most investors would rather avoid, a broken compounding streak, a possible exit load, and sometimes a tax bill you didn't plan for. A loan against mutual funds sidesteps all of that by using your existing holdings as collateral instead of liquidating them.
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What Is a Loan Against Mutual Funds?
A loan against mutual funds allows you to borrow money without selling your mutual fund investments. You pledge your mutual fund units as security for the loan. The lender places a lien (a temporary restriction on selling or redeeming your units) on the pledged units, while your investments remain in your name and continue to be invested. You cannot sell or redeem these pledged units until you repay the loan and the lien is removed.
How much you can borrow depends largely on the type of scheme pledged. The current Mirae Asset Financial Services facility offers up to 45% LTV (Loan-to-Value) ratio against eligible equity mutual funds and up to 80% LTV against eligible debt mutual funds. Interest is charged at 10.25% p.a. only on the amount actually drawn, not on the entire sanctioned limit, which makes this a fairly efficient way to bridge a short-term cash need. Because there's no redemption involved, you also sidestep exit loads and any capital gains tax that a sale would otherwise trigger.
Why Choose FundsIndia for a Loan Against Mutual Funds?
FundsIndia offers the loan against mutual funds facility in partnership with Mirae Asset Financial Services, with the entire process, from lien marking to disbursal, handled digitally rather than requiring paperwork at a branch.
100% Digital Processing
The entire process is online, from applying for the loan to verifying your mutual fund units and receiving the loan amount.
Monthly Interest Collection
The monthly interest payment is automatically deducted from your linked bank account, making repayment simpler. The facility also allows you to prepay the outstanding amount without any prepayment penalty, subject to the applicable terms.
Flexible Repayment
Repay the outstanding amount anytime during the loan tenure, with loan tenure options of 12, 24, or 36 months. There is no charge on foreclosure. So, you can repay without penalty but it is subject to the applicable terms.
Wide Range of Eligible Schemes
Both eligible equity and debt mutual funds held with FundsIndia can typically be pledged, subject to applicable LTV requirements and eligibility criteria.
8,900+ Approved Mutual Funds Across AMCs
The facility provides access to a broad list of approved mutual funds across multiple AMCs.
ZERO Foreclosure charges
Have the flexibility to foreclose on your loan any time before the due with no charges.
Fixed Processing Fee
The loan accounts will have a fixed tenure with a maximum tenure of 3 years and cannot be renewed on maturity. The processing fee for each tenure is fixed. For 1 year: ₹999; for 2 years:: ₹1,299; for 3 years: 1499
Note: Cooling-Off / Look-Up Period: The cooling-off period for a loan against mutual funds is typically 3 days from the date of loan disbursement, during which you can cancel the loan without any foreclosure penalties. While there are no foreclosure penalties, upfront costs like processing fees and stamp duty are generally non-refundable.
Disclosure: Wealth India Financial Services Pvt. Ltd. (WIFS) acts as a digital Lending Service Provider (LSP) / sourcing partner for Mirae Asset Financial Services (Regulated Entity). WIFS may receive a referral fee or sourcing remuneration directly from Mirae Asset Financial Services for loans facilitated via this platform.
How to Access a Loan Against Mutual Funds Through FundsIndia?
The Loan Against Mutual Funds facility on FundsIndia lets eligible investors initiate the process digitally. The underlying lending facility is provided in partnership with Mirae Asset Financial Services, with lien marking handled through CAMS or KFintech.
How to Access a Loan Against Mutual Funds Through FundsIndia?
The Loan Against Mutual Funds facility on FundsIndia lets eligible investors initiate the process digitally. The underlying lending facility is provided in partnership with Mirae Asset Financial Services, with lien marking handled through CAMS or KFintech.
Steps to Get a Loan Against Your Mutual Funds
Here's how the process typically works:
Log in to the Portal
Access your account and go to the Loan Against Mutual Funds section.
Pick Your Fund Type
Choose whether you are pledging equity or debt mutual funds. This decision shapes your eligible loan-to-value ratio down the line.
Complete the KYC
A one-time KYC using your PAN and Aadhaar gets you verified. If your Aadhaar's linked to your mobile number, you can even pull these details straight from DigiLocker.
Lien Marking Process
The registrar, CAMS or KFintech, marks a lien on the selected units on the lender's request, which temporarily restricts redemption until the loan is repaid.
Receive Funds in Your Bank Account
Once the lien is confirmed, bank account details are verified, the loan is sanctioned. The amount is disbursed directly to your registered bank account.
Advantages of a Loan Against Mutual Funds
Here's what makes this route worth considering:
Investments Stay Untouched
Your mutual fund units keep earning returns throughout the loan period since nothing is actually sold.
No Capital Gains Tax or Exit Load
Availing a Loan Against Mutual Funds allows you to access liquidity without triggering capital gains tax or exit loads at the time of borrowing, provided the loan is serviced and repaid as agreed.
Faster Access to Funds Than Traditional Loans
The process usually moves quicker than an unsecured personal loan, since the collateral is already sitting in your demat or folio.
Lower Interest Rates Than Unsecured Credit
Because the loan is backed by liquid collateral, interest rates of loan against mutual funds tend to be more competitive (10.25% per annum) than a typical personal loan or credit card advance.
No Foreclosure Charges
There is no lock-in period or foreclosure charges on early repayment of the loan amount. Close your loan account any time without penalty.
What You Need Before Applying for a Loan Against Mutual Funds
A few things to check before you apply:
Eligible Mutual Fund Holdings
Not every scheme qualifies as collateral; you should hold mutual funds approved by Mirae Asset Financial Services through CAMS and/or KFintech, with eligibility and the applicable loan-to-value ratio depending on the lender's approved fund list.
Completed KYC
A valid KYC on your FundsIndia account is required, along with a valid PAN and Aadhaar Card, before a lien can be marked or a loan processed.
Basic Eligibility
You should be a resident Indian individual aged 18 to 75 years, with a valid mobile number and email ID.
Registered Bank Account
You should have a valid bank account and cheque copy for the account to be linked. Loan disbursal and repayment route through the linked bank account.
Sufficient Holding Value
The value of the pledged units needs to comfortably cover the loan amount requested, factoring in the applicable loan-to-value ratio.
Transparent interest and charges
Interest
10.25% p.a. (on utilized amount) will be due on 1st working day of every month and the same will be debited on 3rd working day of every month from your Bank Account via NACH mandate.
Minimum Withdrawal Amount
Your withdrawal can start from as low as ₹1,000. However, there is no limit on the number of withdrawals.
Stamp Duty
₹500 + Taxes as applicable
Bounce Charges
₹500 + Taxes as applicable
Penal Charges
15.00% P.A. + taxes as applicable on the overdue amount for the default period
Bank Mandate Swap Charges
₹500 + Taxes as applicable
Top Up/Security withdrawal Charges
₹500 + Taxes as applicable
Security Invocation Charges
₹2,000 + Taxes as applicable will be charged in case of default
Collection Charges
₹5,000 + Taxes as applicable (in case of default)
Legal Charges
₹5,000 + Taxes as applicable (in case of default)
Annual Percentage Rate (APR)
10.26% to 23.61% per annum (including fees)
Steps to Get a Loan Against Your Mutual Funds
Log in to the Portal
Access your account and go to the Loan Against Mutual Funds section.
Pick Your Fund Type
Choose whether you are pledging equity or debt mutual funds. This decision shapes your eligible loan-to-value ratio down the line.
Complete the KYC
A one-time KYC using your PAN and Aadhaar gets you verified. If your Aadhaar's linked to your mobile number, you can even pull these details straight from DigiLocker.
Lien Marking Process
The registrar, CAMS or KFintech, marks a lien on the selected units on the lender's request, which temporarily restricts redemption until the loan is repaid.
Receive Funds in Your Bank Account
Once the lien is confirmed, bank account details are verified, the loan is sanctioned. The amount is disbursed directly to your registered bank account.
Advantages of a Loan Against Mutual Funds
Investments Stay Untouched
Your mutual fund units keep earning returns throughout the loan period since nothing is actually sold.
No Capital Gains Tax or Exit Load
Availing a Loan Against Mutual Funds allows you to access liquidity without triggering capital gains tax or exit loads at the time of borrowing, provided the loan is serviced and repaid as agreed.
Faster Access to Funds Than Traditional Loans
The process usually moves quicker than an unsecured personal loan, since the collateral is already sitting in your demat or folio.
Lower Interest Rates Than Unsecured Credit
Because the loan is backed by liquid collateral, interest rates of loan against mutual funds tend to be more competitive (10.25% per annum) than a typical personal loan or credit card advance.
No Foreclosure Charges
There is no lock-in period or foreclosure charges on early repayment of the loan amount. Close your loan account any time without penalty.
What You Need Before Applying for a Loan Against Mutual Funds
Eligible Mutual Fund Holdings
Not every scheme qualifies as collateral; you should hold mutual funds approved by Mirae Asset Financial Services through CAMS and/or KFintech, with eligibility and the applicable loan-to-value ratio depending on the lender's approved fund list.
Completed KYC
A valid KYC on your FundsIndia account is required, along with a valid PAN and Aadhaar Card, before a lien can be marked or a loan processed.
Basic Eligibility
You should be a resident Indian individual aged 18 to 75 years, with a valid mobile number and email ID.
Registered Bank Account
You should have a valid bank account and cheque copy for the account to be linked. Loan disbursal and repayment route through the linked bank account.
Sufficient Holding Value
The value of the pledged units needs to comfortably cover the loan amount requested, factoring in the applicable loan-to-value ratio.
Transparent interest and charges
Interest
10.25% p.a. (on utilized amount) will be due on 1st working day of every month and the same will be debited on 3rd working day of every month from your Bank Account via NACH mandate.
Minimum Withdrawal Amount
Your withdrawal can start from as low as ₹1,000. However, there is no limit on the number of withdrawals.
Stamp Duty
₹500 + Taxes as applicable
Bounce Charges
₹500 + Taxes as applicable
Penal Charges
15.00% P.A. + taxes as applicable on the overdue amount for the default period
Bank Mandate Swap Charges
₹500 + Taxes as applicable
Top Up/Security withdrawal Charges
₹500 + Taxes as applicable
Security Invocation Charges
₹2,000 + Taxes as applicable will be charged in case of default
Collection Charges
₹5,000 + Taxes as applicable (in case of default)
Legal Charges
₹5,000 + Taxes as applicable (in case of default)
Annual Percentage Rate (APR)
10.26% to 23.61% per annum (including fees)
Once these are in order, pledging your holdings and drawing funds can usually be completed within a short turnaround time.
Who Can Consider a Loan Against Mutual Funds?
A loan against mutual funds can be useful when you need funds but do not want to sell your existing investments. Here’s who may consider this option:
Investors With Short-Term Cash Needs
If you need money for a temporary expense, you can borrow against eligible mutual fund holdings instead of redeeming them.
Long-Term Investors
If your mutual funds are meant for long-term goals, pledging them can help you access funds without selling your investments early.
Investors Looking to Avoid Redemption
If you do not want to trigger an exit load or capital gains tax by redeeming your mutual funds, a loan against them may be worth considering.
Investors Looking for an Alternative to Unsecured Loans
If you already have eligible mutual fund holdings, pledging them can provide another borrowing option instead of relying only on personal loans or other unsecured credit.
Disclaimer: Loan accounts are reviewed periodically to assess utilisation and performance. Where required, appropriate actions may be taken in line with internal guidelines.
Credit limit is at the sole discretion of Mirae Asset Financial Services (India) Pvt Ltd. The Loan Against Mutual Funds is for personal use. The loan amount cannot be used for speculative activities, capital market-related purposes, or anti-social purposes. In case of repayment, payment is considered successful upon reflection or settlement within Mirae Asset Financial Services' system; additionally, interest will accrue (if applicable) until the settlement date. Your details are securely shared with our lending partner, Mirae Asset Financial Services, strictly for loan evaluation and processing. We never share your data with unauthorized third parties.
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Frequently Asked Questions
What is a loan against mutual funds?
It's a facility where you pledge your existing mutual fund units as collateral to borrow money, instead of redeeming them. The units stay invested, and a lien is marked on them until the loan is repaid.
How much loan can I get against my mutual funds?
This depends on the scheme type and the lender's loan-to-value norms. Debt funds generally allow a higher loan-to-value ratio than equity funds, since their NAVs are comparatively more stable.
Do I lose ownership of my mutual fund units once I pledge them?
No. The units remain in your name and continue to earn returns; only a lien is marked, which restricts redemption until the loan is settled.
Is there a tax implication when I take a loan against mutual funds?
No capital gains tax applies since there's no redemption involved. Interest paid on the loan, however, does not qualify for any tax deduction unless the borrowed funds are used for a specific purpose that separately qualifies under tax rules. However, in the event of payment default or shortfall in margin requirements leading to lien invocation, the lender reserves the right to liquidate the pledged units, which will trigger applicable capital gains tax and exit loads upon redemption.
What happens if I don't repay the loan on time?
If the loan isn't repaid or the lien isn't lifted within the agreed period, the lender can redeem the pledged units to recover the outstanding amount, subject to the terms agreed at the time of borrowing.
Which mutual funds are eligible to be pledged as collateral?
Both equity and debt schemes are typically eligible, though this depends on the lender's approved list and the specific fund house. Not all schemes across all AMCs are automatically eligible.
How is interest calculated on a loan against mutual funds?
Interest is usually charged only on the amount actually withdrawn or utilised, not on the entire sanctioned limit, which keeps borrowing costs lower compared to a lump-sum loan disbursal.
Can I partially withdraw or redeem pledged units before repaying the loan?
Generally, no. Once a lien is marked, the pledged units cannot be redeemed, partially or fully, until the loan is repaid and the lien is released by the lender.
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