Urgent Cash Needs? Sell or Pledge Your Mutual Funds – Which is Wiser?

In many situations, isn’t pledging investments more profitable than selling them when you need cash? For years, people have been pledging assets like gold jewelry, land, and homes instead of selling them during financial crunches.

Now, mutual fund units have also joined this list. Pledging mutual funds means using your mutual fund units as collateral to secure a loan. This allows you to access cash without selling your investments.

So, why not consider pledging instead of selling your mutual fund units when the need arises?

Table of Contents:

• Get a Loan in Just Four Hours!
• What assets are eligible for securing a loan?
• Who Can Obtain This Loan?
• Who Cannot Obtain This Loan?
• How Much Loan Can You Access?
• How to Apply for the Loan?
• Why Choose a Mutual Fund Loan?
• No Need to Sell Mutual Fund Units for Cash Anymore!
• Final Takeaway

Get a Loan in Just Four Hours!

In today’s digital world, you can access funds by pledging mutual fund units in nearly four hours. Moreover, loan eligibility can be checked in just 15 seconds. If you have units in a demat account, the loan is processed even faster.

You can receive a loan in as little as four hours, depending on the lender and your documentation.

Many banks, non-banking financial companies, and mutual fund distribution firms are now offering loans against mutual fund investments.

The interest rates for these loans range from 10% to 15%, with an average rate of around 10.5%. But have you considered how long you plan to take to repay the loan?

The interest will vary based on the repayment period. For example, if you wish to repay the loan in 24 months, you might face an interest rate of 12%.

If you opt for an 18-month term, it could rise to 12.5%, while a 12-month repayment plan would typically incur a 13% interest rate. Planning to pay it off in just six months? That could mean a rate of 13.5%.

Isn’t it essential to understand how these rates can affect your overall financial strategy?

What assets are eligible for securing a loan?

Individuals can obtain loans by pledging mutual fund units for various expenses, including household needs, children’s education, wedding costs, medical expenses, and travel expenses.

Business owners can also leverage mutual fund units for diverse financial needs, operational capital, and more.

Isn’t it remarkable that these loans can be secured for short-term, medium-term, or long-term financial requirements?

Whether you have immediate needs or future plans, mutual fund pledge loans offer a flexible solution. Why not consider this option for your financial needs?

Who Can Obtain This Loan?

Anyone who has invested in mutual fund schemes can pledge them, regardless of their credit score. There are no minimum salary requirements.

Furthermore, the nature of one’s job does not act as a barrier to obtaining this loan. There are no restrictions regarding a minimum salary or requirements for income proof, such as salary slips or bank statements.

Isn’t it encouraging to know that this loan is accessible to a wide range of individuals, regardless of their financial background?

Who Cannot Obtain This Loan?

Loans against mutual fund units are not available to Non-Resident Indians (NRIs). Additionally, mutual fund units held in a minor’s name cannot be pledged for a loan.

It’s also important to note that you cannot secure a loan against Equity Linked Savings Schemes (ELSS) during their lock-in period.

Isn’t it crucial to be aware of these restrictions to make informed financial decisions?

How Much Loan Can You Access?

The loan amount you can obtain varies depending on the type of mutual fund. For equity mutual funds, you can secure up to 50% of their value as a loan. In the case of debt funds, this can go up to 80%.

For liquid mutual funds, the loan amount can be as high as 90% of their value. Isn’t it impressive that for equity funds, you can borrow up to ₹10 lakhs, while debt funds can allow loans of up to ₹5 crores?

However, these amounts may vary slightly from one institution to another. The minimum loan amount you can request is ₹25,000, which may also differ based on the lender.

These loans are typically repaid on an EMI (Equated Monthly Installment) basis. If you receive a larger sum of money in the interim, would you prefer to pay it off in full or partially? Moreover, there are no prepayment penalties; you can close the loan whenever you wish.

Isn’t it convenient that once the loan is repaid, all the pledged mutual fund units will be returned to you?

How to Apply for the Loan?

Applying for a mutual fund pledge loan is quite straightforward. Have you considered visiting the websites of institutions that offer these loans?

By providing your PAN number, mobile number, and email address, you can easily submit your application.

But what if I told you that you can complete your KYC (Know Your Customer) process digitally? This means you can get your loan approved almost instantly! Isn’t it convenient to have such a quick and efficient way to access funds when you need them? Why not take advantage of this seamless application process?

Why Choose a Mutual Fund Loan?

Let’s explore the key reasons why choosing a mutual fund loan can be beneficial:

1. Lower Interest Rates: While personal loans come with high interest rates of 18% – 24% and credit card debt can range from 36% – 45%, mutual fund loans offer comparatively lower rates. Additionally, you only pay interest on the actual amount you use.
2. Overdraft Facility: You can withdraw only the amount you need, giving you flexibility in managing your cash flow.
3. Minimal Documentation: The loan process is done digitally, requiring little to no documentation.
4. Flexible Repayment: You can repay the loan at any time by just paying the monthly interest.
5. No Prepayment Penalty: There are no penalties or additional fees for paying off the loan early.
6. No Minimum Tenure Requirement: There’s no mandatory tenure, so you can close the loan whenever you want without any restrictions.
7. Available for All Types of Funds: Loans can be availed against equity, debt, or liquid funds, making this option accessible for all kinds of investors.
8. Ownership Retained: Even though your mutual fund units are pledged as collateral, you retain full ownership. The dividends and profits from the investments continue to be credited to you.
9. Online Access: You can monitor your loan account online at any time.
10. Flexible Loan Tenure: Typically, these loans must be repaid within 1-3 years, but it’s easy to extend the tenure if needed.

This way, you can meet your immediate financial needs without disturbing your planned investments. Moreover, once the loan is repaid, you’ll regain your mutual fund units, potentially with added growth.

No Need to Sell Mutual Fund Units for Cash Anymore!

Instead of liquidating your investments, why not pledge them? You get the cash you need without sacrificing future gains.

Once the loan is repaid, your units are returned to you likely with added value. Isn’t it time you let your investments work for you, not against you?

Final Takeaway

Unlock cash without losing your investments! Pledge your mutual funds, secure the funds you need, and watch your assets grow.

It’s a smarter way to borrow—get instant liquidity and still reap future rewards!