Mutual Fund Loans Explained in Simple Terms
Mutual Fund Loans Explained in Simple Terms
A mutual fund loan is a way to borrow money by using your mutual fund investments as security. Instead of selling your mutual fund units, you pledge them to a lender and get a loan based on their current value.
How It Works
You apply online with a lender who offers loans against mutual funds
You choose the mutual fund units you want to pledge
The lender checks the value of your units and approves the loan
A lien is placed on the pledged units (you remain the owner)
The loan amount is credited to your bank account
Once you repay the loan, the lien is removed
What Makes It Useful
You get money without selling your investments
The process is fast and often fully digital
Your investments keep growing while you borrow
You can repay the loan at your convenience
It is usually cheaper than a personal loan
Who Can Use It
Anyone who has mutual fund units in their name and needs funds for short-term needs like education, emergencies, business, or travel can use this loan.
In Short
A mutual fund loan helps you unlock cash from your existing investments without disturbing your long-term plans. It is quick, flexible, and a smart financial choice for investors.