In the ever-evolving landscape of financial services, leveraging your mutual fund investments to secure a loan has become a viable option.
This blog provides a detailed guide on how to avail a loan against your mutual fund units in India in 2023, highlighting the process, benefits, and considerations.
Loans Against Mutual Fund Units
So, here’s the scoop: getting a loan against your mutual fund units is like using your investment’s value as collateral to score some quick cash. No need to cash out and lose potential growth – cool, right?
How to Nab That Loan:
- Check If You’re In:
First off, see if you’re eligible for this loan game. Different lenders have different rules, but they generally look at your mutual fund type, tenure, and loan amount.
- Pick Your Player:
Shop around for lenders offering these loans. Keep tabs on stuff like interest rates, how much loan they’ll give you (a percentage of your fund’s value), and any fees.
- Size Up the Slice:
Think about how much loan you want and what percentage of your mutual fund’s value you’re allowed to borrow.
- Pop the Question:
Fill out the lender’s application form and hand over the usual ID stuff, mutual fund statements, and any other loan-related docs they need.
- Show and Tell:
Lenders do their homework – they’ll size up your mutual fund’s value and the risks involved to decide how much loan you can get.
- Game On:
Approved? Awesome. Cash lands in your bank account, but you’re only paying interest on what you use, not the full loan amount.
- Pay Up and Keep an Eye on Your Funds:
Pay back your loan regularly (with interest), and keep an eye on your mutual fund investments – they’re still growing while you’re paying back.
Benefits of availing loan against mutual funds
- Hands Off Investments: Your mutual funds stay intact – no selling required.
- Play Your Way: You get to choose how long you want to play this loan game.
- Faster Than a Rocket: These loans usually process quicker than your average loan.
- Tax Perks: Sometimes, the loan interest you pay can snag you some tax benefits, depending on what you’re using the loan for.
Stuff to Chew Over Before Jumping In:
- Interest Rates: Compare different lenders’ interest rates to pick the juiciest deal.
- How Much You Can Get: Each lender has a cap on how much loan you can snag against your mutual fund units.
- Investment Reality Check: Remember, the market rollercoaster can affect your mutual fund’s value – just something to keep in mind.
Bottom Line
Availing a loan against mutual fund units offers a strategic approach to accessing funds while retaining your investments’ potential for growth. By following the steps outlined in this guide and considering the benefits and considerations, you can make an informed decision about leveraging your mutual fund portfolio for financial flexibility in India in 2023.
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