How does a loan against mutual funds work?

You pledge your mutual fund units as collateral. A lien is placed on the units through CAMS or KFintech, and the lender provides an overdraft facility. You can withdraw funds as needed and pay interest only on the amount utilized.

Is a loan against mutual funds better than redeeming mutual fund units?

For short-term liquidity needs, a loan against mutual funds can help you avoid redeeming your investments, allowing your portfolio to remain invested while avoiding a capital gains event from selling units.

Who can apply for a loan against mutual funds?

Generally, Indian residents aged 18 to 70 years with eligible mutual fund holdings, a valid PAN, Aadhaar linked to a bank account, and investments registered with CAMS or KFintech can apply. Eligibility may vary by lender.

How much loan can I get against my mutual funds?

The loan amount depends on the type of mutual fund and the lender's Loan-to-Value (LTV) policy. Equity mutual funds typically receive around 45% to 50% LTV, while debt mutual funds may receive 75% to 90%, subject to lender policies and regulatory guidelines.

Is a loan against mutual funds taxable?

No. Since the mutual fund units are pledged rather than sold, borrowing against them does not trigger capital gains tax. Tax implications may differ based on individual circumstances.

What happens if I cannot repay the loan?

If the loan remains unpaid according to the lender's terms, the lender may sell the pledged mutual fund units to recover the outstanding dues.

Can I continue my SIPs during the loan tenure?

Yes. Existing and new SIP investments generally continue as usual. Only the pledged mutual fund units remain under lien until the loan is repaid.

What is Loan Against Mutual Fund? Complete Guide

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Liquify | Monday, July 6th, 2026, 5:34:46 PM

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