Loan Against Mutual Funds Explained

A Loan Against Mutual Funds (LAMF) is a smart way to access liquidity without selling your investments. It allows investors to pledge their mutual fund units as collateral and borrow money from banks or NBFCs while continuing to earn returns on those investments. This guide explains how loans against mutual funds work in India, the types of mutual funds accepted (equity, debt, hybrid), and the process involved in pledging units.

LAMFs are ideal for short-term cash requirements such as emergencies, business needs, or personal expenses. The interest rates are generally lower than unsecured loans because the loan is backed by an asset, and the loan amount depends on the fund type and its Net Asset Value (NAV). This guide also highlights the key benefits—like quick processing, no prepayment penalties, and retention of portfolio ownership—along with potential risks such as market volatility affecting fund value. If you're looking to unlock value from your mutual fund portfolio without disrupting long-term goals, this is a financing option worth considering.