A Guide for Leveraging Mutual Fund Portfolio for a Loan

In the financial landscape, people are flocking to mutual funds to get exposure to the equity market, and also, through that, one has the chance to enjoy the highs that the market provides as an instrument. 

The stock market is a place where one can create wealth in many ways depending on the time they have invested and the amount of money they keep in the market to increase exposure. 

As the exposure of people in the share market has increased, the rise in the pledged share lending has become an option for those who need funds, and through that, one can keep the pledge with the lender. 

Through the One Andro app, one can get in touch with the agents, and they can help the borrower find the right lender who can allow them to pledge mutual funds to get a loan amount. 

How the Loan Against Mutual Funds Works 

A loan obtained against mutual funds allows a person to secure a loan by keeping collateral that will secure the loan amount. Here comes the mutual funds unit that will hold the total value of the asset and allow the borrower to have the advantage of the loans without derailing the investment.  

The advantage of this kind of loan is that it will allow a person to fund their business or use it for personal use while keeping the interest rate low in the loans. In mutual funds investment, one doesn’t need to redeem funds to get the loan, which helps a person to get quick processing. 

Check Eligibility for the Loan 

The eligibility of the loan depends on whether the lender will accept the type of mutual funds that are available to the borrower. For example, a person who is willing to increase the borrowing amount can provide the option of equity, debt, and also hybrid mutual funds that are acceptable by the lender. 

A lender, while lending against a mutual fund option, notes the details of the fund house and also checks whether the fund house provides some external restrictions or not. If the fund passes those criteria, it becomes quite easy for the borrower to get the money as the owner of the mutual fund becomes a joint member where the borrower and the bank both participate. 

Choose the Right Lender 

Selecting the right lender is important as, depending on the loan amount, one can make the entire list of details that they can check between the various banks and NBFCs and find the best proposal for the loan. 

Typically, when an asset backs a loan, the chances of approval are quite high, and hence, the borrower has the option to check the best interest rate available to the person. Apart from the look-through, the total loan tenure is another option that will ensure the borrower about the time they can return all the loans. 

When choosing the lender, Loan Agents are the perfect match who can help the borrower find the right lender, who can reduce the burden of finding the best and the right lender, which can make the borrower comfortable and provide them fair terms.

Pledge the Units of Your Mutual Fund

The next thing that one needs to do is to pledge the mutual funds. By choosing the total asset, one needs to pledge for the required loan amount that NAV will get blocked by the bank. Nowadays, one doesn’t need to visit a bank to pledge to a mutual funds account, and the request for pledging can be done online with the portal of the mutual fund house and that of the lender. 

Follow Through the Loan Approval Process 

Finally, after checking the entire process and the lender receiving the fund holdings in their account, the disbursal process starts. The lender checks the loan-to-value (LTV) ratio and then works on that to find the right NAV of holdings. Then, a lender releases the entire fund to the borrower and the transaction gets settled.  

After the disbursal, the repayment process starts, where a person can strictly follow through with the EMIs they can pay or can make partial payments, which will reduce the interest of the loan and is effective for the borrower. 

These are the processes that a person needs to go through to make their loan against mutual funds successful.