LAMF for Emergency Funds: Is It a Good Desicion?

Emergencies don’t come with a warning. Whether it’s a sudden medical need, a home repair, or an unexpected travel requirement, you might find yourself scrambling for funds. In such moments, liquidating your mutual fund investments may seem like the easiest way out. But what if there was a way to access urgent cash without selling your investments? That’s where a Loan Against Mutual Funds for Emergency Needs makes sense.

LAMF lets you borrow against your mutual fund units without redeeming them. This means your investments stay intact and continue to grow, even while you use the funds to deal with your crisis. In this article, we’ll explore whether using LAMF during emergencies is a financially sound decision and how it compares with other credit options.

Key Takeaways

• Preserve Your Investments: Access funds without breaking your mutual funds.
• Compare Smartly: See how LAMF stacks up against personal loans in emergencies.
• Know the Risks: Understand potential downsides like market volatility.
• Make Informed Choices: See if LAMF fits your situation and goals.

Why Should You Consider LAMF During Crises?

When emergencies strike, getting funds fast without disrupting your long-term plans is crucial.

How does LAMF work?

A Loan Against Mutual Funds (LAMF) allows you to pledge your mutual fund units as collateral to get a loan. You don’t need to redeem your investment. Platforms like Quicklend offer a fully digital application process where approvals can happen in minutes and disbursals in a few hours.

Why not redeem your funds?

Redeeming mutual funds prematurely could mean losing out on potential returns. You might also trigger capital gains tax if you withdraw before a year (for equity funds) or three years (for debt funds). It disrupts your financial planning, especially if you’re saving for goals like your child’s education or retirement.

What makes it ideal for crises?

• Disbursal in as little as 4 hours (based on Quicklend’s process)
• Pay interest only on the amount used – not on the full limit
• No penalties for early repayment or account closure

It’s a good way to handle cash flow crunches without permanently disturbing your investment portfolio.

How Does LAMF Compare with Personal Loans?

Personal loans are popular for emergencies – but are they the smartest option when you have mutual fund investments?

Mutual fund loan vs personal loan

LAMF is a secured loan, so interest rates tend to be lower – often starting from 10.49% p.a. Personal loans, being unsecured, can go above 14 – 18%. Also, LAMF involves minimal documentation, while personal loans may require income proof and credit checks.

Which is easier to get?

If you already hold mutual funds, LAMF is generally easier. You don’t need a high credit score, and approval is mostly based on the value of your pledged funds. Disbursal is faster too – sometimes within hours.

Which is better in the long run?

If you’re looking to manage costs and preserve financial flexibility, LAMF may work better. You can repay early without charges, and your investments continue to grow. Personal loans can be costlier in the long run due to higher interest and rigid EMIs.

What Are the Risks of Taking a LAMF?

While LAMF offers convenience, it’s important to understand the risks involved.

What are the key risks?

The biggest risk lies in market fluctuations. If the value of your mutual funds drops, the lender may ask for additional units as margin or partially liquidate your holdings. Most platforms follow an LTV (Loan-to-Value) ratio of 50 – 70%, so you can’t borrow the full value of your investments.

Can it affect your credit health?

Missing repayments can negatively impact your credit score. Though LAMF doesn’t always require a strong credit score to begin with, repayment behavior is still tracked and reported. Over-borrowing or poor financial planning can leave you exposed to unnecessary debt.

How do you manage these risks?

• Borrow only what you absolutely need
• Maintain some buffer in your mutual fund NAV
• Regularly track both market performance and your loan balance

Always treat LAMF as a short-term liquidity bridge — not a long-term borrowing strategy.

Conclusion

In times of unexpected financial stress, a Loan Against Mutual Funds for Emergency Needs offers a practical, lower-cost alternative to personal loans or breaking your investments. It helps you retain your market exposure, enjoy interest-only EMIs, and access liquidity within hours.

But every financial decision has its trade-offs. Understand the loan terms, evaluate your repayment ability, and only borrow what you can comfortably manage. Used wisely, LAMF can help you sail through emergencies while keeping your long-term goals on track.

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