Have you ever found yourself in need of quick cash but didn’t want to sell your savings or investments? You’re not alone. Many of us face unexpected expenses and opportunities that require immediate funds. For those seeking an instant loan solution, loan against mutual fund offers a quick and effective way to access funds without selling your investments.
In this blog, we will answer all your questions about how it works, the benefits, and whether it’s the right option for you.
What is LAMF? Unlocking Funds from Your Investments
In today’s dynamic world, financial needs can arise unexpectedly. Here’s where a loan against mutual fund steps in as a savior. But what exactly are they? This type of financial facility allows investors to borrow money by pledging their mutual fund units as security. The good part is, you are not required to sell off your investments to meet your immediate financial needs. Sounds convenient, doesn’t it?
Whats even better? It ensures that your investment continues to grow while simultaneously serving as a security for your loan. That’s the beauty of LAMF.
To understand how LAMF utilizes your mutual fund investments as security, it’s helpful to first have a solid understanding of the basics of mutual fund investments. Click here to learn more
How LAMF Works: Turning Investments into Loan Security
The mechanism of obtaining a loan using your mutual funds is straightforward yet efficient. You pledge your mutual fund units to a financial institution. In return, you are granted a loan amount that typically ranges from 60% to 90% of the value of your units. The mutual funds remain in your name; they are merely pledged as security until the loan is repaid.
The interest is charged only on the amount utilized, making it a cost-effective option for addressing short-term financial needs. Moreover, flexibility in repayment terms ensures that borrowers can settle the loan as per their convenience.
Why Consider a Loan Against Mutual Fund?
The question arises, with various loan options available, why opt for a loan against your mutual fund over other options like credit cards, etc. The answer lies in its benefits. These loans offer quick liquidity, ensuring that funds are available when needed. The interest rates are comparatively lower, making it an economical choice.
Moreover, the borrower continues to reap the benefits of the mutual fund’s returns. The units are only kept as a security, and the earnings on these units continue to grow in the investor’s account. Isn’t that a great deal?
Benefits of Loan Against Mutual Funds
Quick Cash Access: One of the biggest benefit of LAMF is getting instant loan without selling your mutual fund investments. Many investors plan to keep their mutual funds for a long time, hoping for significant profits. Selling these investments early can mean losing out on those potential gains. LAMF solves this problem by giving you quick cash without affecting the continued growth of your investments.
Competitive Mutual Fund Loan Interest Rate: LAMF usually has lower interest rates. Since the loan is backed by your mutual fund units, it is considered less risky compared to loans that aren’t backed by any security. With interest rates starting at just 7.46% a year, FinEzzy LAMF is a more affordable option than regular personal loans.
Keep Your Investment Growing: When you use your mutual funds to get a loan, you get the money you need and your investments stay in the market. Even as you use your mutual funds as security for the loan, they can still grow and earn profits, especially when the market is doing well.
Flexible Repayments: LAMF is not just a way to borrow money; it lets you borrow in a way that fits your financial life and goals. Most lenders offer different repayment plans. You can choose a short plan if you want to pay back the money quickly or a longer one if you prefer smaller monthly payments. Some lenders even let you pay off the loan early without extra big fees.
Conclusion
In today’s complex world of money management, LAMF stands out as a flexible and innovative option. Its importance is growing as it allows people to get the cash they need without having to sell their long-term investments. LAMF is all about having instant loan access while letting your investments grow, a combination that’s highly valued today.
FinEzzy stands as a bridge between immediate financial needs and long-term financial growth, assuring that each individual can address their present financial concerns without sacrificing future gains. We are dedicated to making complicated financial processes simple and have done just that with their easy-to-follow LAMF process. FinEzzy uses the latest technology and keeps the user in mind, ensuring that complex financial tools like LAMF are available to everyone, not just experienced investors.
With FinEzzy, you’re not just availing a loan; you’re embracing a pathway that balances your today’s needs with tomorrow’s aspirations, efficiently and effortlessly.
Frequently Asked Questions (FAQs)
LAMF is a financial facility that allows investors to borrow money by pledging their mutual fund units as security, without the need to liquidate or sell their investments.
LAMF provides immediate liquidity to meet urgent financial needs while allowing the mutual fund investment to remain active and potentially appreciate. This way, investors can meet their immediate financial requirements without missing out on potential future returns.
The loan amount is typically a percentage of the net asset value (NAV) of the pledged mutual fund units. This percentage can vary based on the type of mutual fund and the lender’s policies.
If the NAV of the pledged mutual funds decreases significantly due to market fluctuations, the lender might request the borrower to either pledge additional mutual fund units or pay the amount equivalent to the value of fall to maintain the agreed loan-to-value ratio.
Yes, LAMF often comes with competitive interest rates since it’s secured against mutual fund units, making it a more cost-effective borrowing option compared to unsecured personal loans.
No, the mutual fund units pledged for LAMF are marked with a lien in favor of the lending institution, meaning they cannot be sold or redeemed until the loan is fully repaid.
It’s essential to understand the inherent risks associated with mutual funds, compare LAMF with other borrowing mechanisms, and have a clear repayment strategy in place.
