Loan against mutual funds: Mutual funds are a safe and effective way to invest, which not only helps you save money for the future but also provides a better understanding of the market. However, mutual funds are not just about investing, you can also use them as a tool to take a loan in an emergency. Loans against mutual funds are very quick. These loans are provided by NBFCs (non-banking financial institutions) and banks. The loan amount is based on the market value of your mutual fund portfolio.

This loan is processed faster as the documentation process is minimal and the pledge is done digitally. This makes the loan approval and disbursement faster. The loan amount depends on the type of mutual fund you have. For example, the loan limit on equity funds is low, while it can be higher on debt funds. The biggest advantage of this loan is that the funds pledged remain yours and you keep receiving the dividend or interest on them.

Other benefits
of superfast loan against mutual funds include low interest rates. Since this loan is against pledged shares, it is completely safe for the lender. Its interest rates are lower than personal loans. Also, it can be used for a variety of personal expenses. However, there are some risks associated with this loan.

Under what circumstances can the bank sell the
mutual fund? The prices of mutual funds depend on market fluctuations. If the market is volatile, it can affect the price of the pledged asset and the loan-to-value ratio can change. If you fail to repay the loan, the bank or NBFC can sell your pledged funds, due to which you may lose your property.

Moreover, if you need a higher loan amount, this option may not always prove to be sufficient, especially when the pledged asset is based on equity funds. Taking a loan against mutual funds can be a wise decision, provided you manage your financial planning properly.