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How to Avail a Loan Against Mutual Fund Units? 

Financial emergencies frequently arise, which require the need for quick money. In such situations, you can meet your urgent financial demands from your savings. However, if your funds are locked in different investments, withdrawing money from them may result in a penalty.Also, redeeming your stocks or mutual funds may not be your first choice since it might disrupt your financial plans or result in a loss of long-term wealth-generating potential.  

Thus, borrowing money is another alternative for dealing with such financial issues. You can choose a loan for your mutual funds which will serve as collateral for secured loans. 

Steps to Avail a Loan Against Mutual Funds 

1. Assess Eligibility 

Begin by evaluating the eligibility criteria set by lenders, including minimum investment tenure, types of mutual funds eligible for pledging, and the loan-to-value (LTV) ratio offered. Ensure compliance with lender requirements, such as submitting Know Your Customer (KYC) documentation and adhering to investment guidelines. 

2. Select a Lender 

Conduct thorough research to compare loan providers offering LAMF services, considering factors like interest rates, loan processing fees, and repayment terms. Choose a reputable lender such as FinEzzy, with a track record of reliability, transparency, and customer-centric services. 

3. Evaluate Loan Terms 

Review the terms and conditions of the loan, including interest rates, loan tenure, and repayment options. Assess the impact of borrowing on investment returns and ensure alignment with financial objectives. 

4. Initiate Loan Application 

Complete the loan application process by providing necessary documentation such as mutual fund statements, identity proof, and address proof. Apply online through FinEzzy with a fully digital process. 

5. Loan Approval and Disbursement 

Await loan approval from the lender, subject to verification of pledged mutual fund units and fulfillment of eligibility criteria. Upon approval, the loan amount is disbursed directly to the borrower’s designated bank account, providing immediate access to funds. 

Benefits of Loan Against Mutual Funds with FinEzzy 

1. Liquidity 

One of the primary advantages of opting for a loan against mutual funds is the immediate access to funds it offers, the process usually takes about 15 minutes for loan disbursal. This is to assure that you can meet your urgent money requirement. 

2. Retention of Investments 

By leveraging your mutual fund holdings as collateral for a loan, you can retain ownership of your investments. This means you can continue to benefit from potential capital appreciation and dividends, preserving the value of your portfolio over time. 

3. Lower Interest Rates 

Loan against mutual funds typically come with lower interest rates compared to unsecured loans, making it a cost-effective borrowing option. These competitive rates help minimize the overall borrowing costs, allowing you to access funds at a more affordable rate. 

4. Tax Efficiency 

Unlike selling investments, which may incur capital gains tax, the proceeds from a loan against mutual funds are not treated as taxable income. This tax efficiency ensures that you can access funds without worrying about additional tax liabilities, optimizing your financial efficiency. 

5. Flexible Repayment Options 

A loan against mutual funds offers flexible repayment terms to suit your financial preferences. Whether you prefer the convenience of Equated Monthly Installments (EMIs) or prefer to make lump-sum payments, you have the flexibility to choose a repayment schedule that aligns with your financial situation and goals. Also, there are no preclosure charges on the early repayment of the loan. 

Considerations Before Availing a Loan Against Mutual Fund 

1. Risk Management 

Before opting for a loan against mutual funds, it’s essential to assess the risk of default and the potential impact on your investment portfolio in case of non-repayment. Consider factors such as market volatility, the stability of your investments, and your ability to meet the repayment obligations to mitigate the risk effectively. 

2. Cost Analysis 

Conduct a thorough cost analysis to evaluate the total borrowing costs associated with the loan. This includes assessing the interest charges, processing fees, prepayment penalties, and any other expenses involved in availing the loan. By understanding the complete cost structure, you can make an informed decision and ensure that the borrowing is financially viable. 

3. Investment Strategy 

It’s essential to align your borrowing decisions with your overall investment strategy and financial objectives. Consider how leveraging your mutual fund investments for a loan fit into your broader financial plan. Assess whether the potential benefits of accessing funds outweigh the risks involved and whether it aligns with your long-term financial goals and risk tolerance. 


Availing a loan against mutual fund units offers a smart solution for meeting short-term financial needs while protecting long-term investments. By understanding the process, evaluating terms, and considering the implications, individuals can leverage this financial instrument effectively. Platforms like FinEzzy facilitate seamless loan processing, providing borrowers with convenient access to liquidity while preserving their investment portfolios.  

With careful planning and prudent decision-making, borrowers can avail themselves of the loan against the mutual fund with confidence and financial resilience. 

Frequently asked questions

All investments have some risk. But mutual funds try to reduce risk by investing in many different things. So, if one thing doesn’t do well, the other might make up for it.

We tailor our advice and suggestions to your needs. If wealth management is your goal, our algorithms go through millions of data points to come up with suggestions that sit perfectly with your risk appetite, existing financial goals and the prevailing market conditions. If you are interested in credit, we address the need while also ensuring you do not compromise on your broader financial goals.

Most mutual funds let you take out your money when you want. But some might have rules or charges if you take it out too soon.

To start, you can talk to a bank or a financial advisor. They can guide you on how to put your money in a mutual fund.

Yes, there might be some charges. These are for managing the fund and other services. It’s good to ask about these before you invest.

No, you don’t need a lot of money. Many mutual funds allow you to start with a small amount as low as INR 500.