Should You Opt for a Loan Against Mutual Funds (LAMF)? Is It Better Than Personal Loans?

A Loan Against Mutual Funds (LAMF) allows investors to leverage their mutual fund investments as collateral to secure a loan. Without liquidating your holdings, you can access funds while your investments continue to grow. This product provides financial flexibility and is a valuable alternative to traditional personal loans.

How Does It Benefit You?

Retain Investment Growth: Unlike selling your mutual funds, pledging them as collateral allows you to keep earning returns.
Lower Interest Rates: LAMFs often offer more competitive rates than personal loans or credit cards.
Quick Processing: Loans are typically processed within hours, especially with digital platforms like Liquify.
Flexible Repayment: Interest is charged only on the amount utilized, with no foreclosure penalties.

Who Provides Loans Against Mutual Funds?

LAMFs are offered by banks, Non-Banking Financial Companies (NBFCs), and fintech platforms. Fintech solutions like Liquify simplify the process with fully digital platforms, quick approvals, and secure transactions backed by RBI-registered lenders.

How Does a Loan Against Mutual Funds Work?

Pledge Mutual Funds: Your equity or debt mutual fund units are marked as lien in favor of the lender.
Determine Loan Limit: The loan amount depends on the portfolio’s value, typically 50-90% of the fund’s worth.
Receive Funds: Once approved, the loan amount is credited to your account.
Repayment: You pay interest only on the amount utilized and can prepay anytime without penalties.

How Does Margin Call Work in LAMF?

In case the value of your mutual funds drops below a specified threshold, the lender may issue a margin call. This requires you to either pledge additional funds or repay a portion of the loan to maintain the loan-to-value ratio.

Effective Interest Rate on Loans Against Mutual Funds

Interest rates for LAMFs typically range from 10% to 13%, which is lower than personal loans. Additionally, the interest is charged only on the utilized amount, further reducing the cost.

How Does LAMF Compare to Other Loans?

Feature	LAMF	Personal Loan
Collateral Required	Yes (mutual funds)	No
Interest Rates	10%-13%	13%-20%
Impact on Investments	Investments remain intact	No investments required
Processing Time	Quick (2-3 hours)	Moderate (24-48 hours)
Loan Tenure	Flexible	Fixed

When Should You Take a Loan Against Mutual Funds?

Short-Term Needs: Ideal for medical emergencies, education expenses, or home renovations.
Avoid High-Interest Loans: Opt for LAMF instead of credit cards or personal loans.
Preserve Investment Growth: When you want liquidity without selling your mutual funds.’

Why Choose Liquify for Your Loan Against Mutual Funds Needs?

Liquify provides a seamless, secure, and customer-friendly experience for LAMFs:

Quick Disbursals: Receive funds in as little as 2 hours.
Competitive Rates: Starting at just 10.5% per annum.
Digital Process: Apply online with minimal documentation.
Flexible Repayment: Pay interest only on the utilized amount.
Trusted Partner: Backed by RBI-registered lenders and advanced encryption for secure transactions.

Conclusion<H3>

A Loan Against Mutual Funds is a smart choice for investors looking to access funds without disrupting their portfolio’s growth. With lower interest rates, quick disbursals, and flexible repayment options, it stands out as a superior alternative to personal loans. Liquify ensures that your borrowing experience is fast, secure, and hassle-free.

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