Taking a loan against mutual funds is a convenient way to get your hands on money quickly. Doing so not only keeps your existing investment intact, but it also lets it grow throughout the loan’s tenor. This short-term loan will be particularly attractive to you if you are expecting payments from various sources in the near future, and are just looking for a cost-effective, stop-gap solution.
One lender with whom you can apply quickly and easily is Bajaj Finserv. With a Loan Against Mutual Funds by Bajaj Finserv, you can get a high loan amount of up to Rs.10 crore for a tenor of 12 months. Here you not only get a competitive loan against mutual funds interest rate, but you can also enjoy the Flexi Loan facility, a scheme wherein you pay interest only on the amount utilised from the total loan grant. In addition, you can also pay interest as EMIs through the tenor to manage cash flow better and repay the principal once the tenor is up.
But before you sign up for a loan against mutual funds, here 3 important rules to keep in mind.
Your loan amount will be less than the market value of your mutual fund
The loan amount you stand to receive is directly proportional to the market value of your mutual funds. Lenders withhold a margin in case of market fluctuations or any default on the part of the borrower. The ratio of the loan amount granted as compared to the value of the asset is known as the loan-to-value ratio. Loan Against Mutual Funds offers you a loan-to-value margin of 50%. That means that in order to get a loan of Rs.5 crore you need to have pledged assets amounting to at least Rs.10 crore. Check out more about what is consumer durable loan.
The interest rate levied is variable and partly depends on you
Lenders will not give every customer the same interest rate. While each lender will have its own range of interest rates, the actual rate you get the loan at depends on your past credit history. For example, if you have repeatedly defaulted on payments or paid bills late, then the chances of negotiating for a nominal interest rate are slim. Lenders do this to compensate for the risk involved due to non-payment of the loan amount. On the other hand, having a good credit score builds the lender’s trust and you are more likely to get a cost-effective interest rate.
Units can be swapped, redeemed and the lender can execute a lien in case of default
Units can be swapped in the sense that you can take away one of some of your pledged securities and replace them with others that comply with the approved scrips list and are of equal value. For instance, if some of the units that you pledged were earmarked for your daughter’s wedding, you can release them easily by pledging other units of the same value or other securities.
Moreover, units can be redeemed partially by repaying a portion of the sanctioned amount. On the other hand, if you default on loan repayment, the lender has the right to exercise a lien. That means that the lender will now have the legal right to acquire your units, sell them and recover the loss incurred.
With these insights in mind, you are ready to avail a high-value loan against mutual funds quickly. What’s more, when you apply for a loan against mutual funds, you get a dedicated relationship manager who will help you evaluate your units and make the best decisions. To hasten the process of getting the loan amount you are looking for, check your pre-approved loan offer before you apply.