The Indian mutual fund industry is growing at a promising rate. As of 2022, its AUM is estimated to be somewhere in the region of Rs 35.64 trillion. With more and more people investing in securities thanks to improving financial literacy, it has become the order of the day for most people to rely on their mutual funds as a long-term investment. These assets present multiple opportunities for holders, including the ability to get quick money on mutual funds without actually having to sell any units per se. That happens via a concept called loans against mutual funds.

What is a loan against mutual funds?

For many people, mutual fund units offer an option in terms of wealth generation given their abilities to accrue interest and compound capital growth fast. However, they can also be used to get out of sticky financial situations, particularly when you find yourself in dire need of quick cash.

A quick loan against mutual funds simply implies that you get a loan amount from a lender, that could be a bank or an NBFC, with your mutual fund units serving as the collateral for your loan.  It is a great way to obtain money on mutual funds without having to sell or redeem hard-earned investments, a process that can further attract tax redemption charges which can reduce the amount of money that winds up in the borrower’s pocket.

The exact loan amount that you will get hinges on several factors, namely:

•         Size of the units you’ll pledge. The more mutual fund units you have, the larger the sum you can borrow
•         Type of the lender: LTV (loan to value ratio) values differ from one lender to another. Some offer 50% of your mutual funds units’ value, while NBFCs such as Abhi Loans can get you really high LTVs of even up to 75% depending on your exact mutual fund units.
•         Type of mutual fund units: Your LTV can value also depending on the name of your mutual fund units.

For many banks that offer quick capital against mutual funds, which are processed on average between 1 to 2 weeks, such schemes are usually limited to a few pre-qualified customers and not everyone and many attract huge prepayment fees of even up to 2% of your outstanding balance. Additionally, many such institutions implement a high lower limit ceiling on the loan, usually starting at Rs 100,000, which can lock out small unit holders.

With NBFCs like Abhi Loans, however, we are starting to see a lot more democratization in the loan against mutual funds industry. Thanks to this NBFC, common individuals can even access loans starting from Rs 15,000.

How to apply for a loan at Abhi Loans

Your loan application procedure for cheap loans against mutual funds will largely depend on the lender you approach, and whether the processing occurs offline or online. At Abhi Loans, one of the most trusted loans against MF providers in India in recent times, the process is fully digital and has easy documentation requirements.

In fact, you can apply for a loan from Abhi Loans in just 4 simple steps as follows:

1)     Visit www.abiloans.com to start your application process

2)    Complete your KYC documentation upload via Digi locker or fill it up a new in seconds

3)    Use CAMSx to mark a lien on your mutual fund units which pledges that you will not sell the shares before the loan tenure expires

4)    Put ink to paper by signing a virtual agreement and you’re all done

Overall, their fully digital processing ensures you can entirely apply online, without having to go through any lengthy and tedious manual processes. To know exactly how much money you stand to receive from your loan against mutual funds at a cheap rate, head on to the Abhi Loans website and use their calculator. It will help you know how much you can borrow, the LTV of your specific mutual funds unit’s name, your loan tenure period, and the monthly interest rate.

Before you apply though, there are a few minimum criteria you’ll need to check first if you meet. Some of those include:

•         That you’re a single mutual fund unit holder. Typically, up to three joint holders can hold mutual fund units and this is called a joint mutual fund holding. To be eligible for a loan against MF units from Abhi Loans, however. And your units need to be singly held, which means you have sole ownership over them.
•         Secondly, you’ll need to have mutual funds units in CAMS: CAMS is a mutual funds transfer agency that basically offers protection during MF transactions. So to quality, your mutual funds unit need be to be CAMS-link and you should have the ID to show for it.

In terms of loan ranges, Abhi Loans offers loans starting from Rs 15,000 and going up to 10 lacs although there are provisions to borrow even higher, although to talk to their team on support@abhiloans first. The loan tenure at Abhi loans is typically 1 year, but that period is renewable, allowing borrowers to pay with ease without having to strain. Meanwhile, the EMI typically ranges at about 1.5%, which means your monthly installments for a 1 lac loan will be about Rs 1,500. And you have the option to further repay just the money that you have used up until the time of repayment.

The loan tenure at Abhi loans is typically 1 year, but that period is renewable, allowing borrowers to pay with ease without having to strain.

Bottomline

There are many lenders today availing loans against mutual funds, but you’d do well to steer clear of opportunistic ones who have interest rates as high as 24%, among other exorbitant measures. One of the best providers for a loan against mutual fund units at cheap rates is Abhi Loans, an NBFC which promises fast loan disbursal in 24 hours and low-interest rates that can go as low as 13% for EMI-based loans, where borrowers pay the principal and monthly interest. Moreover, Abhi Loans offers the lowest EMI in the market and has no prepayment charges so you can pay anytime. And avails loans against mutual funds to anyone regardless of credit history. To apply, visit the Abhi Loans website today.