What is Instant Loan against Mutual Funds ?

 

BY: Pankaj Bansal , Founder at Newspatrolling.com     

An instant loan against mutual funds is a type of secured loan where you pledge your mutual fund investments as collateral to borrow money from a financial institution. This loan is typically offered by banks and non-banking financial companies (NBFCs). Here's how it works:

Key Features

1. Collateral: Mutual fund units are pledged as security.
2. Loan Amount: Based on the value of your mutual fund holdings (typically 50-80% of the fund's net asset value).
3. Processing Time: Instant or within a few hours, depending on the lender.
4. Tenure: Ranges from a few months to a few years.
5. Interest Rate: Lower than unsecured loans like personal loans since it’s a secured loan.

How It Works

1. Apply through a bank’s website or mobile app.
2. Authorize the lender to access your mutual fund holdings through a central depository (like NSDL or CDSL in India).
3. The lender evaluates the value of your holdings.
4. If approved, the loan amount is disbursed quickly.

Benefits

• No Asset Liquidation: You retain ownership of mutual funds and continue to earn returns.
• Quick Access: Fast processing compared to traditional loans.
• Flexible Repayment: Many lenders offer flexible repayment options.

Risks

• Market Fluctuations: If mutual fund values drop, lenders may require additional collateral or partial loan repayment.
• Interest Costs: Extended repayment can increase overall borrowing costs.

 

Top Lenders Offering Instant Loans Against Mutual Funds in India

1. HDFC Bank
• Loan Type: Overdraft facility
• Eligibility: Resident Indians with mutual fund holdings
• Loan Amount: Up to 50% of equity fund value and 80% of debt fund value
• Processing Time: Instant if holding details are verified
2. ICICI Bank
• Loan Type: Loan against Securities
• Eligibility: Individuals with mutual funds held in demat form
• Loan Amount: Minimum ₹50,000; maximum based on mutual fund value
• Processing Time: Same-day disbursement
3. Axis Bank
• Loan Type: Overdraft against Securities
• Eligibility: Mutual fund units registered with CDSL or NSDL
• Loan Amount: Depends on mutual fund value and lender policy
• Processing Time: Fast approval for existing customers
4. Bajaj Finserv
• Loan Type: Flexi Loan
• Eligibility: Mutual fund holders through authorized platforms
• Loan Amount: Up to ₹10 crore (based on mutual fund portfolio)
• Processing Time: 24-48 hours
5. Kotak Mahindra Bank
• Loan Type: Loan against Securities
• Eligibility: Mutual fund holdings with approved depositories
• Loan Amount: Based on the fund's current market value
• Processing Time: Same-day loan disbursal after verification

 

Application Process

1. Check Eligibility: Ensure your mutual funds are in demat form and linked to a depository like NSDL/CDSL.
2. Apply Online: Visit the lender’s website or mobile app.
3. Authorization: Give permission for the lender to access your mutual fund holdings.
4. Loan Approval: The lender evaluates your portfolio and approves the loan.
5. Disbursement: The amount is credited directly to your bank account.