Imagine this: You are in a tight spot, urgently needing funds. Borrowing from family or friends isn’t an option, but fortunately, your investments in Mutual Funds have grown, providing you with a financial lifeline.
Now, you’re faced with a dilemma: cash out your assets or leverage them for a quick loan against Mutual Funds.
Option 1: Cashing Out Assets
Cashing out assets entails liquidating your Mutual Fund investments to obtain immediate funds. However, this process typically takes 2-3 days to complete. While it provides quick access to money, it comes at the expense of potentially impacting your long-term investment strategy.
Option 2: Loan Against Mutual Funds (SIP)
On the other hand, leveraging Mutual Funds for a loan, commonly known as a loan against SIP or loan against Mutual Funds, offers a swift solution to your financial predicament. With this option, you can obtain a loan within 15 minutes by pledging your Mutual Fund units as collateral.
This allows you to retain ownership of your investments while accessing much-needed funds in a timely manner.
While the latter option seems enticingly speedy, let’s not rush into a decision based solely on expediency. Instead, let’s weigh the pros and cons of both scenarios to make an informed choice.
| Factors | Cashing Out Assets | Loan Against Mutual Funds (LAMF) |
| Time to Access Funds | 2-3 days | Within 15 minutes |
| Impact on Investments | Assets liquidated | Mutual Fund units remain intact |
| Interest Rates | N/A | Starts just at 7.46% P.A. |
| Credit Score Impact | N/A | May not affect credit score |
| Costs and Fees | Redemption charges, taxes | Processing fees, interest charges |
| Flexibility | Limited | Flexible repayment terms |
| Market Conditions | Potential realization of losses | Stay invested, potential growth |
| Reaping Benefits | No ongoing benefits | Continued investment growth |
Exploring the Factors:
- Time to Access Funds: Selling out assets might require two or three days, while a Loan Against Mutual Funds offers close quick admittance to reserves, making it ideal for dire monetary necessities.
- Impact on Investments: Redemption can disrupt your long-term investment strategy, though LAMF helps you to keep up with ownership of investments while getting funds.
- Interest Rates: LAMF ordinarily offer competitive interest rates, making them a practical choice compared to other types of loans.
- Credit Score Impact: LAMF might not directly affect your credit score, offering a suitable arrangement without endangering your reliability.
- Costs and Fees: While redeeming, think about any related expenses, for example, reclamation charges or assessments, which can lessen the amount received. But a Loan Against Mutual Funds might include handling expenses or interest charges, yet these are often lower than different types of credit options.
- Flexibility: LAMF offers adaptability in repayment terms and amount, allowing you to fit the credit to your requirements and situation. This flexibility can be helpful in overseeing income and planning efficiently.
- Market Conditions: Consider the ongoing economic situation and possible effects on your investments. Redeeming your funds during a downturn might bring losses, while LAMF helps you to stay invested and possibly benefit from market recuperation.
- Reaping Benefits: By choosing Loans against Mutual Funds, you can keep on profiting from continuous growth, guaranteeing that your monetary future remains secure while addressing current requirements.
While the immediacy of getting funds might appear to be tempting, it’s basic to think about the long-term implications and calculate the advantages and disadvantages of every choice. While selling out Mutual Funds gives fast access to reserves, it comes at the cost of potentially disrupting your investment strategy.
Then again, utilizing leveraged Assets for a credit offers a quick and effective arrangement without undermining your long-term financial objectives.
Eventually, opting for a Loan Against Mutual Funds (LAMF) emerges as the wise choice. With LAMF through FinEzzy, you retain ownership of investments while swiftly accessing funds, ensuring both immediate needs and long-term financial stability.
By carefully evaluating the factors discussed and considering your individual circumstances, you can make a well-informed choice that aligns with your financial objectives and secures your financial future.
