Question 1

What is a loan against mutual funds?

Accepted Answer

A loan against mutual funds allows you to borrow money by pledging your mutual fund units as collateral, without selling them.

Question 2

How much can I borrow against mutual funds?

Accepted Answer

The loan amount depends on the value and type of mutual funds you pledge. Generally, you can borrow up to 50-80% of the Net Asset Value (NAV) of your mutual fund investments. Liquify ensures a transparent evaluation to help you get the maximum eligible amount.

Question 3

Can I still earn returns from my mutual funds?

Accepted Answer

Yes! Your mutual funds remain invested and continue to grow, allowing you to benefit from both liquidity and long-term returns. Also, you will have the full benefits associated with your mutual funds.

Question 4

What is the interest rate of loan against mutual funds at Liquify?

Accepted Answer

The interest rate at Liquify varies based on the fund type and market conditions. It typically starts from 10.5% per annum (replace with your actual rate) and is structured to be competitive, ensuring affordability for borrowers.

Question 5

How quickly can I get the funds?

Accepted Answer

Once approved, you can receive the loan amount within 2 hours in your bank account.

Question 6

What is the minimum and maximum loan a customer can get through Loan Against Mutual Funds?

Accepted Answer

The minimum loan amount through Loan Against Mutual Funds is ₹25,000, and the maximum can go up to ₹2 crores, depending on the value of the pledged mutual funds and the lender's criteria.

Question 7

What documents are required?

Accepted Answer

Just your PAN and your mobile number are sufficient to process a loan request.

Question 8

Can I repay the loan early?

Accepted Answer

Yes, you can repay the loan early without any prepayment penalties.

Question 9

What happens when the value of my MF units/portfolio falls?

Accepted Answer

If the value of your portfolio falls below the required margin, a margin call will be initiated. You will need to either deposit additional funds or pledge more mutual fund units to maintain the margin.

Question 10

What happens if the value of my mutual fund drops?

Accepted Answer

If the value of your mutual fund units drops significantly, Liquify may request additional collateral or ask you to repay part of the loan to maintain the required loan-to-value (LTV) ratio.

Question 11

Is it safe to pledge my mutual funds?

Accepted Answer

Yes, your mutual funds remain in your name, and Liquify ensures that your assets are secured.

Question 12

What methods are used in determining the credit limit?

Accepted Answer

The credit limit is determined as a function of the LTV (Loan-to-Value) where LTV for Equity Mutual Funds is 45% and for Debt Mutual Funds, it is 75%. However, the actual loan amount is dependent on the amount and category of the pledged mutual funds specified in the application.

Question 13

Is it going to affect my CIBIL Score when Liquify is checking my eligibility?

Accepted Answer

Liquify does not check your CIBIL score to determine eligibility. Instead, we assess the value of your mutual fund investments to calculate your credit limit, ensuring a quick and hassle-free process.

Question 14

What is pledging/lien marking of securities?

Accepted Answer

Lien marking is the process where your mutual fund units are pledged as collateral for the loan. While the units remain in your portfolio and continue earning returns, they cannot be redeemed or sold until the lien is removed after loan repayment.

Question 15

When will the lien be removed from my funds?

Accepted Answer

The lien will be removed immediately after the loan is fully repaid, including any applicable charges, and the process is confirmed by Liquify.

Question 16

How many days does it take to remove the lien?

Accepted Answer

Lien removal is typically sent to AMC within 24 hours. It might take 3-4 working days for AMC to remove the lien.

Question 17

Can I lien mark any mutual fund units of my choice?

Accepted Answer

Not all mutual funds are eligible. Liquify allows lien marking on Hybrid, Liquid, Equity, and Debt Mutual funds. Demat MFs are eligible with a quick offline process which can be done by Team Liquify. Note: ELSS funds are not eligible.

Question 18

Do I have to pay interest on the complete OD limit?

Accepted Answer

No, with Liquify, you only pay interest on the amount you withdraw and not on the entire OD limit sanctioned.

Question 19

Will I be charged interest if I don’t use the OD amount?

Accepted Answer

No, if you don’t withdraw any funds, you won’t be charged any interest. Liquify ensures you only pay for what you use.

Question 20

Can you provide a margin call example?

Accepted Answer

Suppose your mutual fund portfolio is worth ₹10,00,000, and Liquify allows you to borrow 90% of this value, i.e., ₹9,00,000. If the portfolio value drops to ₹8,00,000 due to market fluctuations, the loan-to-value ratio (LTV) will exceed the permissible limit. Liquify will issue a margin call, and you will need to deposit additional funds or pledge units to restore the LTV ratio.

Question 21

Can you provide a margin shortfall example?

Accepted Answer

Let's say your pledged mutual funds are worth ₹5,00,000, and Liquify has approved a loan of ₹4,50,000 (90% LTV). If the market value of your funds falls to ₹4,00,000, there will be a shortfall of ₹50,000. You must either deposit this amount or pledge additional units worth ₹50,000 to maintain the margin.

FAQs

What is a loan against mutual funds?

How much can I borrow against mutual funds?

Can I still earn returns from my mutual funds?

What is the interest rate of loan against mutual funds at Liquify?

How quickly can I get the funds?