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Why Does Loan Against Mutual Funds Make Sense?

loan against mutual funds

Instead of waiting for lengthy approval processes or dealing with the hassle of selling assets, getting into the value of your mutual fund investments allows you to access cash almost instantly. This gives a sense of security and peace of mind in times of financial need, without having to disrupt your long-term investment goals. 

Taking a loan against your mutual funds can be a smart financial move for various reasons. So, let’s get into it. 

Lower Interest Rates Compared to Others 

One of the key factors that make LAMF more appealing is the lower interest rates compared to other types of loans. This cost-effective feature allows borrowers to access funds at a relatively lower cost, making it a more attractive option for those looking for financing. By leveraging their mutual fund investments, individuals can benefit from reduced interest expenses and potentially save money in the long run. 

Quick Access to Funds 

Loans against mutual funds often come with lower interest rates compared to traditional personal loans or credit cards. This means that not only are you able to access funds quickly, but you can also do so at a more affordable cost. By leveraging your mutual fund holdings in this way, you can take advantage of favorable terms and conditions that make borrowing money more manageable and financially beneficial.  

Continue Earning Returns on Mutual Funds 

 The beauty of loans against mutual funds lies in their flexibility and convenience. This innovative concept allows you to retain ownership of your assets while unlocking their value to meet urgent expenses or investment opportunities. By doing so, you can continue earning returns on your MFs while accessing the necessary funds without disrupting your long-term investment strategy. 

No Impact on Credit Score 

When it comes to taking out a loan against your mutual funds, one common concern is its impact on your credit score. The good news is that, in most cases, getting a loan against your mutual funds will not have any direct impact on your credit score. Since these types of loans are secured by the value of your mutual fund holdings, they are considered low risk for lenders and typically do not require a credit check. 

Flexibility in Repayment Options 

Most traditional loan products come with fixed repayment schedules and interest rates. However, loans against mutual funds offer a unique advantage in terms of flexibility in repayment options. Borrowers can choose from various repayment plans tailored to their financial needs, such as monthly, quarterly, or annual installments. This flexibility allows borrowers to manage their cash flow more effectively and align repayments with their income cycles. 


So, to wrap it up – opting for a loan against mutual funds can indeed be a smart move in certain situations. While it may involve some risks, the benefits often outweigh them. By leveraging your existing investments, you can access quick funds without liquidating your holdings and potentially missing out on future growth opportunities. 

So next time you find yourself in need of some extra cash, consider exploring the option of a loan against your mutual funds with FinEzzy – it could be just the solution you’re looking for! 

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.