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Loan Against Mutual Funds & CIBIL Score Impact

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In India’s fast-evolving financial landscape, more investors are discovering smarter borrowing options — like taking a Loan against mutual funds (MFs) But a common question looms large: Does loan against MF affect CIBIL score?


Let’s unpack this for Indian investors and personal finance enthusiasts, especially if you're considering this through a trusted fintech platform like Quicklend.


Understanding Loans Against Mutual Funds

What is a Loan Against Mutual Funds?

A loan against mutual funds allows you to borrow money by pledging your mutual fund units as collateral. Instead of liquidating your investments during financial crunches, you can retain market exposure and get liquidity at the same time. If you’re curious, you can learn more about the rates & chargeskey eligibility criteria and other advantages of LAMF.

This facility is particularly helpful during emergencies, short-term financial goals, or even for business needs — without impacting your long-term wealth creation.


Key Features and Benefits of These Loans


What is CIBIL Score and Why Does It Matters?

Breakdown of a CIBIL Report

CIBIL (Credit Information Bureau India Limited) is India's leading credit information company. Your CIBIL score ranges from 300 to 900 and reflects your creditworthiness. Check out a detailed explanation here.

A typical report includes:

  • Loan accounts
  • Credit card history
  • Repayment behavior
  • Defaults, if any


Factors That Affect Your CIBIL Score

  • Payment History (35% weight)
  • Credit Utilization Ratio
  • Length of Credit History
  • Types of Credit Used
  • Number of Hard Inquiries

Your CIBIL score plays a pivotal role in determining loan approvals and interest rates.


Does Taking a Loan Against Mutual Fund Impact CIBIL Score?

When It Might Impact Your Score

Generally, if you miss EMIs or delay repayments, it will reflect negatively on your CIBIL score — like any other credit product. Also, if the lender performs a hard inquiry, it could temporarily reduce your score.


When It Won’t Affect Your Score

In most cases, especially with fintech platforms like Quicklend, loans against MFs are structured in a way that doesn't trigger a hard pull on your credit report.

Moreover:

  • No over-leverage (your MF units are the only collateral)
  • No direct entry on credit bureau unless default occurs
  • Regular repayments can maintain or even improve your score


Comparison with Traditional Loans


How Quicklend Ensures Minimal Impact on Your Credit Score

No Hard Inquiries on CIBIL

Quicklend has partnered with partner NBFCs which typically conduct soft checks, meaning your score isn’t impacted during the application process nor does it hamper your eligibility for getting approved.


Transparent Reporting Practices

Even if reported, the loan will be classified correctly — secured and collateralized — which doesn’t carry the same risk as an unsecured loan.


Tips to Maintain a Healthy CIBIL Score While Using Loans Against MF

Repay on Time

Always schedule EMIs smartly or opt for auto-debit options. Timely repayments are the biggest contributors to a healthy credit score.


Monitor Your Credit Utilization Ratio

Even though this is a secured loan, keep overall debts low relative to your income.


Check Your CIBIL Report Regularly

CIBIL allows one free report per year. Use it. Spot discrepancies and raise disputes if necessary.


Common Myths About Loan Against Mutual Funds and CIBIL Score

Myth 1: All loans negatively impact your credit score.

Fact: Not true. A loan only affects your score if you miss payments or default. Responsible repayment can even improve your score.


Myth 2: Loans against mutual funds are treated like unsecured loans or credit cards.

Fact: These are secured loans. They are typically not treated the same way unless there is a payment issue.


Myth 3: Your credit score drops just by applying for a loan.

Fact: Your score only drops if a hard inquiry is made. Many lenders check eligibility using soft inquiries, which do not affect your score.


Conclusion

So, does loan against MF affect CIBIL score? Technically, it can — but only if you misuse it. With platforms like Quicklend, you’re in control. Our structure ensures minimal credit score disruption while maximizing borrowing power. Loans against mutual funds are a savvy choice for disciplined investors. Use them wisely, repay on time, and enjoy liquidity without compromising your long-term financial goals.


This is general guidance. For personalized loan advice, contact our team at Quicklend.

Author Tanvi Sharma
Published 1 August 2025

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