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Financial Calculator

Loan Against Mutual Funds Calculator 2025

Get instant liquidity without selling your mutual fund investments.

Calculate EMI with 50-60% LTV ratio

₹
₹1L₹1Cr
%

Loan Amount: ₹5.00 L

You can borrow 50% of your portfolio value

30%60%
%
8%18%
months
1 month60 months

Monthly EMI

₹44.07 K

Loan Amount
₹5.00 L
Total Interest
₹28.89 K
Loan Duration
12 months
Total Amount Payable
₹5.29 L

Loan Composition

12
Months to pay
Loan Amount
₹5.00 L
94.5%
Interest Amount
₹28.89 K
5.5%
Interest vs Principal Ratio

0.06x

You'll pay 0.06 times the principal as interest

Understanding Loan-to-Value (LTV) Ratio for Mutual Funds

What is LTV Ratio?

LTV (Loan-to-Value) ratio is the percentage of your mutual fund portfolio's current Net Asset Value (NAV) that you can borrow as a loan. It's lower than gold loans due to market volatility of mutual funds.

For example, if your portfolio is valued at ₹10,00,000 and the LTV ratio is 50%, you can get a maximum loan of ₹5,00,000.

LTV Ratio by Fund Type

Equity Funds45% - 50%

Higher volatility, lower LTV

Debt Funds50% - 55%

More stable, slightly higher LTV

Liquid Funds55% - 60%

Most stable, highest LTV

Loan Against Mutual Funds Benefits

Get instant liquidity while keeping your investments active

Who Should Use This?

Loan Against Mutual Funds is ideal for:

  • Investors needing short-term liquidity (3-12 months)
  • Those who don't want to exit investments prematurely
  • People looking to avoid capital gains tax on redemption
  • Emergency fund requirements without selling assets
  • Individuals with strong mutual fund portfolio
  • Those seeking lower interest than personal loans (8-14%)
  • Business owners needing working capital temporarily
  • Salaried professionals facing temporary cash crunch

Who Should Avoid This?

This loan may not be suitable if you:

  • Need funds for long-term use (over 2 years)
  • Have irregular income and uncertain repayment capability
  • Your mutual funds are underperforming or in significant loss
  • Need more than 60% of your portfolio value
  • Planning to use it for speculative investments
  • Can liquidate poor-performing funds without major tax impact
  • Have access to cheaper financing (like home equity loan)
  • Don't have sufficient mutual fund units

No Investment Disruption

Your mutual funds continue to earn market returns while being pledged as collateral.

Lower Interest Rates

Interest rates typically 8-14% p.a., much lower than personal loans (12-24%).

Quick Disbursal

Get funds within 24-48 hours. Completely digital process with minimal documentation.

Tax Efficient

Avoid capital gains tax that would apply if you sold mutual funds prematurely.

Flexible Repayment

Repay anytime without prepayment charges. Option for interest-only EMI.

Portfolio Remains Active

Units are pledged, not sold. You benefit from market appreciation during loan period.

Tax Implications of Loan Against Mutual Funds

No Immediate Tax Liability

Taking a loan against mutual funds is NOT a taxable event. You don't incur any capital gains tax as units are pledged, not sold.

Interest Expense Not Deductible

Interest paid on mutual fund loans is generally NOT tax-deductible, unless the loan is used for business purposes and you can prove business use.

Units Continue Earning Returns

Your pledged units continue to earn returns and compound. Tax on capital gains applies only when you redeem units after loan closure, based on holding period (LTCG/STCG rules apply).

Tax Efficiency vs Selling

More tax-efficient than selling mutual funds prematurely. If you sell equity funds before 1 year, you pay STCG @ 20%. By taking loan, you avoid this and keep compounding benefits.

Pro Tip: For tax planning, consult a tax advisor. Tax rules may vary based on usage of loan proceeds and your tax slab.

Withdrawal Terms & Conditions

During Loan Period

  • Pledged units cannot be redeemed or sold
  • Cannot switch to other mutual fund schemes
  • Units remain in lien with the lender
  • SIPs in pledged schemes may need to be paused

Partial Release Options

  • Make partial repayment to release some units
  • Minimum amount applies for partial release (typically ₹50,000)
  • Processing time: 2-3 business days
  • Small processing fee may apply (₹100-500)

Loan Renewal & Extension

  • Can renew loan by paying accrued interest
  • Maximum loan tenure usually 12-36 months
  • Renewal subject to portfolio value review
  • Renewal charges may apply

Full Repayment & Closure

  • No prepayment penalty in most cases
  • Units released within 2-3 business days
  • Can close loan anytime after 1 month
  • Interest calculated till closure date

Important: If loan defaults, lender can liquidate pledged units to recover dues. Maintain adequate funds for timely EMI payment to avoid liquidation.

Demise, Succession & Nomination

What Happens After Demise?

  • Loan becomes part of deceased's estate
  • Legal heirs responsible for outstanding amount
  • Lender may freeze the pledged units
  • Units can be liquidated to recover loan if unpaid
  • Heirs can repay loan to reclaim units

Importance of Nomination

  • Quick claim settlement process
  • Nominee gets immediate access to handle loan
  • Prevents family disputes over assets
  • Reduces documentation burden
  • Avoids lengthy legal processes

Loan Insurance Coverage

Some lenders offer optional loan insurance that covers outstanding amount in case of borrower's death:

Premium: 0.5-1% of loan amount annually
Coverage: Full outstanding loan amount
Family gets mutual fund units back
Optional, not mandatory coverage

Best Practice: Always provide nomination details during loan application. Update nominee information if life circumstances change. Consider loan insurance for peace of mind.

How to Apply for Loan Against Mutual Funds

Important: Where to Apply

You cannot get a loan directly from RTAs (CAMS or KFintech). RTAs only maintain records of your mutual fund investments and facilitate the lien marking process. You must approach a Bank or NBFC that offers loans against mutual funds.

1

Choose a Lender & Apply

Research banks (SBI, HDFC, ICICI) and NBFCs offering LAMF. Compare interest rates, LTV ratios, and terms. Apply via their website/app with your PAN, Aadhaar, and bank details

2

Select Funds to Pledge

Choose which mutual fund units to pledge as collateral from the lender's approved scheme list. Note: ELSS and funds with lock-in periods are not eligible

3

Lien Marking by RTA

Lender sends request to RTA (CAMS/KFintech) to mark lien on your units. You authorize via OTP. Once marked, you can't sell units but continue to own them and receive dividends

4

Sanction & Disbursement

After successful lien marking, bank/NBFC approves loan and disburses funds to your account. Often provided as overdraft facility - pay interest only on amount used

5

Repayment & Lien Removal

Upon full repayment, lender notifies RTA to remove lien. Units are released back with full access. In case of default, lender can liquidate pledged units to recover dues

6

Track Online

Monitor loan status, EMI payments, and lien status through lender's website/app. Digital process allows you to track everything without branch visits

Banks/NBFCs (Lenders)

Provide the actual loan amount. Examples: SBI, HDFC Bank, ICICI Bank, Bajaj Finserv, IIFL Finance

RTAs (Facilitators)

Maintain MF records and mark lien on units. CAMS, KFintech (formerly Karvy). They DON'T lend money

You (Borrower)

Own mutual fund units, apply for loan, authorize lien marking, and repay to get units released

Digital Process Benefits

  • 100% paperless application process
  • No branch visit required for most lenders
  • Instant portfolio valuation and LTV calculation
  • Quick disbursal within 24-48 hours post lien marking
  • OTP-based authorization for lien marking - secure and instant
  • Track application status and lien status online
  • Overdraft facility available - pay interest only on amount used

Documents Required

Mandatory Documents

  • PAN Card

    Mandatory for all loan applications

  • Aadhaar Card / Voter ID / Passport

    For identity verification

  • Mutual Fund Portfolio Statement

    Latest statement showing holdings

  • Bank Account Statement

    Last 3-6 months for repayment capacity

  • Address Proof

    Utility bill, rent agreement, etc.

  • Passport Size Photographs

    2-3 recent photographs

Additional Documents (if required)

  • Income Proof

    Salary slips, ITR for loans above ₹5 lakh

  • Employment Proof

    Appointment letter, business registration

  • Demat Account Statement

    If units held in demat form

  • ITR Returns

    Last 2 years for self-employed

  • Form 16

    For salaried individuals

  • Business Proof

    GST registration, business license

Note: Document requirements may vary by lender and loan amount. Digital/scanned copies are accepted for online applications. Original verification may be done later.

Eligibility Criteria

Age Requirement

  • Minimum age: 21 years
  • Maximum age: 65 years
  • Some lenders allow up to 70 years

Residential Status

  • Must be Indian resident
  • NRIs generally not eligible
  • Proof of residence required

Mutual Fund Holdings

  • Must own mutual fund units
  • Units should be in your name
  • Minimum portfolio value: ₹1 lakh

KYC Compliance

  • Valid KYC with mutual fund AMC
  • PAN card is mandatory
  • Updated contact details required

Income Requirement

  • No minimum income for small loans
  • Income proof for loans above ₹5 lakh
  • Regular income source preferred

Employment Type

  • Salaried employees eligible
  • Self-employed eligible
  • Business owners eligible
  • Housewives with MF holdings eligible
  • Retired persons eligible

Good News: Eligibility for mutual fund loans is quite relaxed compared to unsecured loans. Even homemakers and retired persons can get loans if they own mutual fund units.

Hidden Charges & Fees to Watch Out For

Processing Fee

0.5% - 1.5% of loan amount

One-time fee charged upfront. Can be ₹500 to ₹10,000 depending on loan amount.

💡 Often waived for existing customers or during promotional periods.

Pledge/Unpledge Charges

₹100 - ₹500 per transaction

Charged when units are pledged to lender and when released after repayment.

💡 Some digital lenders offer free pledge/unpledge.

Valuation Charges

₹100 - ₹300 per valuation

Periodic valuation of pledged units for loan monitoring.

💡 Usually included in processing fee for smaller loans.

Late Payment Penalty

2% - 4% per month

Heavy penalty on missed EMI payments. Also affects credit score.

💡 No waiver. Set up auto-debit to avoid penalties.

Prepayment Charges

Usually Nil

Most lenders don't charge prepayment penalty for mutual fund loans.

💡 Check loan agreement - some may charge 1-2% if closed early.

Stamp Duty

Varies by state

Legal requirement on loan agreement document. ₹100-500 typically.

💡 Mandatory, cannot be waived.

Loan Renewal Charges

₹200 - ₹1,000

Charged if you extend loan tenure by paying interest.

💡 Varies by lender policy.

Partial Release Charges

₹100 - ₹500

Fee for releasing some units after partial repayment.

💡 Some lenders offer 1-2 free partial releases.

Pro Tips to Minimize Charges

  • Compare total cost (interest + all fees) across lenders, not just interest rate
  • Negotiate processing fee - many lenders offer discounts
  • Set up auto-debit to avoid late payment penalties
  • Read loan agreement carefully before signing
  • Digital lenders typically have lower fees than traditional banks