In India, a considerable number of people invest in securities such as mutual funds, shares, bonds, insurances and more.

Investing in such policies not only help you earn a decent to higher returns. But you even pledge them with a lender to grab funds for your multiple needs at a lower rate.

The facility is known as the loan on mutual funds and is available across many banks and non-banking finance companies (NBFCs). However, when it comes to the application of loan on mutual funds, you should not apply for it with any lender.

Your prospective lender needs to offer you some features and perks that may make your loan application and money disbursal easy.

Here’s what you should look at when securing a loan on mutual funds:

  • Is your lender accepting mutual funds as the collateral

The first thing that you should ensure is whether your prospective lender is accepting your mutual fund as the collateral to offer you the loan. Lenders may have an approved list of securities against which you can take a loan. Hence, you should go ahead and find if mutual funds feature as the collateral or not.

  • Is your lender offering a high amount at a lower rate

You should also look for a lender who can provide you with a considerable amount of money against your mutual funds. The higher is the worth of your collateral, the higher will be your loan amount. Many lenders can let you borrow as high as up to Rs.10 crore at an affordable interest rate.

  • Is there is an offering of flexible repayment tenor?

You should also try to look for a lender that can offer you the flexibility of repaying the loan as per your financial standing. Most of the known banks and other service providers may offer a tenor ranging between 12-36 months to repay the loan. Some lenders also let you make some prepayments and foreclosure facilities without asking for any fees.

Hence, whenever you get any surplus amount, you can make some prepayment to reduce the principal amount. In turn, it also helps you bring down the loan EMI amount, assisting a borrower to manage monthly costs better.

  • What about the eligibility criteria and loan processing time?

People generally pledge their securities and apply for a loan on mutual funds only when there is an urgent need of money at their end. Now, with an urgent need if a lender takes time to process the loan application, will it serve the purpose? No, right! Thus, it becomes another point that a borrower should check before applying for the loan against mutual funds.
The eligibility parameters of a lender also need to be checked whether it’s easier to meet or complicated. Based on these observations in advance, you can easily prepare yourself to prove the eligibility and get the loan.   

  • What about the documents required to get loan against mutual funds?

To prove your eligibility, you have to submit documents along with the loan against mutual funds application form. This step is straightworward too. You do not have to submit copious documents and you must provide ones that are actually typically within easy access. This includes ID proof, address proof, a passport size photograph and document proof of security ownership.

  • Can you track the loan online?

With everything available and could be traced online, should the loan on mutual funds be behind? Many lenders let their borrowers access their loans online. It is made possible when the lenders give them login access to access the digital customer portals. This way, a borrower can track the loan details right from anywhere and 24/7 without visiting the lenders physically.

Final Words: The loan on mutual funds can work wonders for you when you need some immediate fundings to fulfil your personal needs like family trip, wedding expenses, medical expenses or for business needs like expansion of business or buy new business equipment for your running business, and for that, you don’t need to liquidate your assets. However, being aware of some facilities offered by a lender also boost your confidence before enrolling for it.

This publication is contributed towards by Seema Gupta.