https://v2.webnotes.in/tags/loan-against-mfs/Recent content in Loan-Against-Mfs on WebNotesHugoen-INTue, 19 May 2026 00:00:00 +0000https://v2.webnotes.in/loan-against-mfs/Tue, 19 May 2026 00:00:00 +0000https://v2.webnotes.in/loan-against-mfs/<p><strong>Loan against mutual funds (LAMF)</strong> is a credit product offered by banks, NBFCs, and broker-lenders that provides a loan against pledged mutual fund units as collateral. The product enables liquidity access without redeeming the underlying MF holdings, preserving long-term investment positions and avoiding capital-gains tax on premature redemption.</p> <h2 id="product-structure">Product structure</h2> <h3 id="loan-amount">Loan amount</h3> <ul> <li>Based on LTV applied to pledged unit value.</li> <li>Typical limit: Rs 50,000 to Rs 5 crore per borrower.</li> </ul> <h3 id="tenure">Tenure</h3> <ul> <li>Revolving credit lines: continuous availability.</li> <li>Term loans: 1 to 5 years.</li> </ul> <h3 id="interest">Interest</h3> <ul> <li>Typical rate: 9 to 14% per annum.</li> <li>Lower than personal loans (~12 to 18%).</li> <li>Higher than home loans (~8 to 10%).</li> </ul> <h3 id="lender-types">Lender types</h3> <ul> <li><strong>Banks</strong>: HDFC, ICICI, Kotak, Axis offer LAMF products.</li> <li><strong>NBFCs</strong>: Bajaj, Tata Capital.</li> <li><strong>Broker-lenders</strong>: Some integrated through demat / pledge infrastructure.</li> </ul> <h2 id="process">Process</h2> <ol> <li>Investor selects units to pledge.</li> <li>Units pledged in demat account.</li> <li>Lender disburses loan based on LTV.</li> <li>Investor pays interest and principal per terms.</li> <li>On full repayment, pledge released.</li> </ol> <h2 id="vs-alternatives">Vs alternatives</h2> <table> <thead> <tr> <th>Product</th> <th>LTV / Limit</th> <th>Interest</th> <th>Tenure</th> </tr> </thead> <tbody> <tr> <td><strong>LAMF</strong></td> <td>50-95% of MF value</td> <td>9-14%</td> <td>Flexible</td> </tr> <tr> <td>Personal loan</td> <td>Income-multiple</td> <td>12-18%</td> <td>1-7 years</td> </tr> <tr> <td>Home loan</td> <td>80-90% property</td> <td>8-10%</td> <td>Up to 30 years</td> </tr> <tr> <td>Gold loan</td> <td>75% gold value</td> <td>8-12%</td> <td>1-3 years</td> </tr> <tr> <td>Credit card</td> <td>Limit-based</td> <td>24-42%</td> <td>Revolving</td> </tr> </tbody> </table> <p>LAMF sits in the secured-credit middle ground, competitive with gold loans and below personal loans on cost.</p>