How to Apply for Loan against Mutual Fund Investment

When there is a financial need, you can use your mutual fund investments as a mortgage to avail the advance and that too without liquidating your funds. Almost all banks and NBFCs provide the loan against mutual funds and it has many advantages as well. You can apply for a loan against mutual fund investment at rates comparatively lower than personal loans. Read here the advantages also the interest rates on loan against mutual funds offered by top banks in India.

What are the advantages of Loan against Mutual Funds?

There are many advantages of taking a loan against mutual funds that differentiate it from other loans. Unlike other loans, loan against mutual funds has following benefits:

  • The option of receiving immediate liquidity against the mutual fund units you own.
  • Similar to an overdraft facility for short-term monetary requirements taken for a shorter period of time
  • Tool to leverage idle mutual fund investments and raise capital
  • You do not have to sell your mutual fund units and the ownership of fund units remains intact after pledging them for a loan

How to avail/apply for Loan against Mutual Fund Investment?

You can apply online if you hold mutual fund units in demat form and have a prior approval. However, if you hold the units in physical form, you need to execute a loan agreement with your financier. The role of the financier is to write to the mutual fund registrar like CAMS or Karvy and ask them to mark a lien on a certain number of units that are being pledged. Lien is a document that gives the bank the right of ownership to hold or sell the funds. The loan will be offered to you on the basis of the value of units held in the folio of your mutual fund account. After the repayment of the loan, the bank will lift the lien and you get the rightful ownership of your mutual fund units. Lenders generally lend about 60-70% of the value of the pledged units. Some of the top banks where you can apply for a loan against mutual funds are as follows:

  • Bajaj Finserv Loan against mutual funds
  • SBI loan against mutual funds
  • Axis Bank loan against mutual funds
  • HDFC Bank loan against mutual funds
  • ICICI Bank loan against mutual funds
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Loan against mutual funds interest rate

The interest rate on loans against mutual funds is comparatively lower than personal loans. Below are the interest rates on loan against securities at top 5 banks:

BanksInterest Rate (p.a.)Loan amountProcessing Fees
State Bank of India (SBI)11.15%Equity/Hybrid/ETF Mutual Funds: Up to ₹20 lakhs
Debt/FMP Mutual Funds: Up to ₹5 crores
0.75% of the Loan Amount + applicable GST (Max: ₹50,000 +applicable GST)
Axis Bank10.50% to 12.50%Upto 85% of security value0.15% of the loan amount or ₹1000/- whichever is higher plus GST
HDFC Bank8.15%-12.85%Up to 80% of the value of the securitiesUp to 1% of the loan/sanctioned credit limit, subject to a minimum of ₹2,000/- (Non-Refundable
ICICI Bank8.25%-12.00% Up to ₹20 lakhs₹3500 plus applicable GST. CARLB Cases : 0.25% of the loan amount subject to a minimum of ₹5000 plus applicable GST.
Bajaj Finserv9% – 12%Up to ₹10 crores0.25% to 1.00% of loan amount

Disclaimer – Mutual Funds are subject to market risks. Please read the scheme related documents carefully before investing.

Personal Loan Interest Rates March 2018
Bajaj Finserv 10.99% - 16.00%
Fullerton India 14.00% - 33.00%
HDFC Bank 10.99% - 20.99%
ICICI Bank 10.99% - 18.40%
IndusInd Bank 10.99% - 16.00%
Kotak Bank 10.99% - 17.99%
RBL 13.00% - 18.00%
Standard Chartered Bank 10.99% - 14.99%
Tata Capital 10.99% - 18.00%
Home Loan Interest Rates March 2018
State Bank of India/SBI 8.35% - 8.80%
HDFC 8.35% - 8.95%
Bank of Baroda 8.30% - 9.30%
LIC Housing 8.35% - 8.70%
PNB Housing Finance 8.35% - 8.70%
ICICI Bank 8.35% - 8.85%
Axis Bank 8.35% - 8.75%
Citibank 8.40% - 9.25%
Indiabulls Housing Finance Limited 8.35% - 11.25%
Kotak Bank 8.35% - 8.50%
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