Loan Against Mutual Funds in Delhi NCR

Get a loan against mutual funds in Delhi NCR

An efficient alternative to help you get through financial emergencies

Because of the unpredictability of life, emergencies can occur at any time. However, it isn’t always possible to plan for every possible type of financial emergency. That is why many people choose liquid investment options like mutual funds.

You might be tempted to redeem your mutual fund investments in the event of a financial emergency, but this is not recommended. Redeeming your long-term mutual fund investments will throw off your financial plan and make it more difficult to reach your financial objectives. When you desperately need money, Loan Against Mutual Funds in Delhi NCR can rescue you. The best part of a Loan Against Mutual Funds is that you keep your mutual fund investments, which means you can apply for one almost immediately. Sounds intriguing, don’t you think?

What is a Loan Against Mutual Funds in Delhi NCR?

It’s a special kind of loan secured by your securities that enables you to get cash in an emergency without having to redeem or sell your securities, in this case, your mutual fund investments.

Many banks and Non-Banking Financial Companies (NBFCs) now provide offline and online loans against mutual funds. Placing them in the bank or NBFC to obtain a line of credit enables you to benefit from your mutual fund investments. Your eligibility for a loan is determined by the value of the units in your folio and the loan’s term.

Redeeming the units pledged is not allowed until the loan is fully repaid because the mutual fund units are being used as collateral. Your subsequent SIPs are not interrupted if you have active SIPs (Systematic Investment Plans).

Loan Against Mutual Funds in Delhi NCR
Loan Against Mutual Funds in Delhi NCR

Let’s examine the crucial elements of Loan Against Mutual Funds to get a better understanding.

Fund House

The fact that not all banks and NBFCs accept mutual funds managed by all asset management companies (AMCs) is crucial to understand. Only fund houses registered with Computer Age Management Solutions Private Limited (CAMS), K FINTECH, NSDL & CDSL India’s largest mutual fund transfer agency, are accepted by many prestigious banks.

Lien on Mutual Funds

Understanding how the lien on mutual fund units functions is crucial. To obtain a lien on mutual fund units in your lender’s name, you must contact the fund house. You must submit the application form with information such as your folio number, the name of your scheme, the number of units, etc.

You give the bank or NBFC permission or the right to sell or hold the mutual fund units in case of loan repayment default or for margin purposes by placing a lien on the units in their name. The dividends and hypothetical returns earned on the mutual fund units you’ve pledged to benefit you, the investor, even though the lien on the units is registered in the name of the lender.

The margin requirement on units

The margin is the loan amount offered as a percentage of the share’s Net Asset Value (NAV). In the case of equity mutual funds, most banks and NBFCs typically offer loan amounts of up to 50% of the NAV and up to 80% of the NAV in the case of debt mutual funds. Nevertheless, this margin varies between lenders. There are minimum and maximum loan amount caps at some banks and NBFCs. Additionally, lenders charge a small processing fee when processing a loan.

Interest charged

The interest rate on a Loan Against Mutual Funds is more or less same as that of a personal loan it is typically 14% and only charged on the quantity used and for the time it was used, or pro rata. Remember that banks provide an overdraft facility called Loan Against Mutual Funds. The amount is usable up to the sanctioned cap.

What are the benefits of availing a Loan Against Mutual Funds?

Your mutual fund units do not need to be redeemed or liquidated. As a result, you can continue to plan for your long-term financial objectives.

Your SIP payments continue to be made without impeding wealth creation.

You can apply for the loan both offline and online.

Compared to other loans, the application procedure is fairly straightforward.

Compared to other loan types, the approval and disbursement process is quick.

It is a helpful form of credit, especially if you don’t have a good credit history.

This loan has a much lower interest rate than unsecured personal loans.

There is no EMI system; you can make payments whenever it’s convenient while the loan is outstanding.

Prepayments are not subject to any fees.

When should a Loan Against Mutual Funds application be submitted?

Instead of selling your investments or stopping your SIPs when you need money fast and are looking for a more affordable line of credit, it makes sense to consider applying for a Loan Against Mutual Funds in Delhi NCR.

There are no restrictions on using a Loan Against Mutual Funds as long as you use the money legally. You must, however, choose when it is best to apply for the loan or redeem your mutual funds. It is wise to borrow to prevent a loss from selling mutual fund units at a lower price and take advantage of falling market conditions. On the other hand, when the market is at its best, and you have amassed wealth, redeeming the funds might be a better option.

How to apply for a Loan Against Mutual Fund?

To apply for a Loan Against Mutual Funds online, follow these general instructions:

Go to the official website of the bank or NBFC you want to borrow from. Each bank or NBFC might use a unique procedure.

You can get a Loan against Mutual Funds in just 15 minutes. Simply register for free, enter your information (name, address, age, and contact information, for example), upload your documents (a Consolidated Account Statement of your mutual fund portfolio), select the investments you want to mark as liens, review the terms & conditions, and you will receive the money digitally. That’s how easy it is; there’s no complicated paperwork.

An accomplished group of people with success in the Indian Fintech industry runs FINTITUDE. You can be sure that your data is private and secure and that using the internet is as safe as possible.

When should a Loan Against a Mutual Fund be closed, and how?

The fund house releases the lien on your mutual fund units upon request from the lender following prompt and complete repayment of the loan. You will have complete access to your mutual fund investments once the lien has been released. Loans may be repaid in part with many lenders. The lender will release some units based on the amount you’ve partially paid.

And if you cannot pay back the loan, the lender will ask the fund house to redeem the mutual fund units, which will be paid back from the redemption proceeds. The best option in a financial emergency may be a Loan Against Mutual Funds. You can get one without liquidating your mutual fund portfolio and paying a lower interest rate. Loan Against Mutual Funds has grown in popularity as a form of credit due to banks and NBFCs raising their level of awareness. Because of this, think carefully about why you need the money, make a repayment plan, and read all the terms and conditions before applying for a Loan Against Mutual Funds.