Loan Against Mutual Funds (LAMF) allows you to pledge your mutual fund units as collateral to obtain a loan from banks or Non-Banking Financial Companies (NBFCs). This is an overdraft facility, meaning you get a credit limit based on the value of your pledged holdings, and you pay interest only on the amount utilized.
Our LAMF Services
- MF Eligibility Checker: Helping you identify which funds in your portfolio are typically accepted as collateral by lenders.
- Instant Quote Generator: Providing indicative loan limits and interest rates based on your pledged holdings (API integration required).
- Lender Connect: Facilitating connections with partner NBFCs and Banks offering LAMF facilities (e.g., Bajaj Finserv, HDFC Bank, ICICI Bank).
- Process Guidance: Explaining the pledging process and documentation required by lenders.
How it Works & Key Features
- Pledging Units: Your eligible mutual fund units (usually equity and sometimes debt funds) are pledged with the lender.
- Overdraft Facility: You receive a credit limit (typically 50-70% of the value of pledged equity units, higher for debt units). You can withdraw funds up to this limit as needed.
- Interest on Utilized Amount: Interest is charged only on the amount withdrawn from the overdraft account and for the duration it is used.
- No Liquidation Needed: Your investments continue to potentially grow even while pledged, as you don't sell the units. You remain entitled to dividends/bonuses.
- Quick Processing: Generally faster processing compared to unsecured loans, as it's secured against your investments.
- Flexible Repayment: Often involves servicing only the interest, with the principal adjustable against the overdraft limit or payable later.
Use Cases
LAMF can be used for various short-term to medium-term financial requirements, such as:
- Managing temporary cash flow mismatches.
- Funding urgent personal expenses.
- Making down payments or bridging finance needs.
- Meeting business working capital requirements.
Important Considerations
Lenders apply a margin (haircut) to the value of units, meaning the loan limit is less than the market value. If the market value of pledged units falls significantly, the lender may ask for additional units to be pledged or for partial repayment (margin call). Interest rates are typically higher than home loans but potentially lower than personal loans.