Loan Against Mutual Funds: Benefits, Risks & How It Works

If you've ever found yourself needing urgent cash but hesitated to sell your mutual fund investments, you're not alone. Loans against mutual funds (LAMFs) are becoming a go-to option for many Indian investors who want short-term liquidity without disrupting their long-term goals.

Unlike personal loans or credit cards, LAMFs are backed by your existing investments. This means you can borrow money while your mutual funds continue to earn returns in the market. It's a financial move that offers both stability and speed.

In this article, we’ll walk you through the benefits and pitfalls of loans against mutual funds to help you decide whether it's the right choice for your financial situation.

Key Takeaways

• Loan against mutual funds gives you quick liquidity without selling your investments
• Interest rates are lower than personal loans, starting at 10.49% p.a.
• Mutual funds continue to grow while you borrow against them

Why consider this type of loan?

Loans against mutual funds are gaining popularity for good reason. Here's why they might work for you.

What’s a loan against MF?

A loan against mutual funds is a type of secured loan where you pledge your mutual fund units as collateral. In return, a lender offers you a credit line or a lump sum amount.

Secured vs unsecured loans

Unlike personal loans (which are unsecured), these loans are backed by your investments. That usually means better interest rates and lower risk for the lender.

Who offers these loans?

Banks, NBFCs, and fintech lenders like Quicklend provide LAMFs. Fintechs tend to offer faster, fully digital processes ideal if you need money quickly.

What benefits can you expect?

This type of loan offers a combination of convenience, cost savings, and flexibility.

Is it cost-effective?

Yes, especially when compared to personal loans or credit cards. With interest rates starting from 10.49% p.a. (as of 2025), it’s often cheaper. Plus, you only pay interest on the amount you actually use.

How fast is the process?

With lenders like Quicklend , you can get digital approval in under 15 minutes and receive the funds in as little as 4 hours. No lengthy paperwork or branch visits.

Does your investment stay safe?

Yes. Your mutual funds stay intact and continue to earn returns. You don’t need to redeem them, so your long-term growth isn’t affected.

Can I repay flexibly?

Most lenders offer interest-only EMI options. You also get the benefit of a revolving credit line, and there are typically no charges for early repayment.

What are the possible pitfalls?

Like any credit product, loans against mutual funds come with certain risks you should be aware of.

Can NAV drops affect my loan?

Yes. Since your loan value is tied to your mutual fund’s NAV, a market dip may trigger a margin call or require you to pledge additional units.

What if I miss payments?

Missing payments can hurt your credit score. In extreme cases, the lender may sell your pledged units to recover the loan.

Are there hidden charges?

Some lenders may have processing or renewal fees. Always read the fine print. With Quicklend, all charges are transparent and upfront.

Is it better than a personal loan?

If you have a steady income and don’t want to break your investments, this is usually a smarter option. But since it's secured, it requires discipline to manage well.

Conclusion

Loans against mutual funds can be a smart choice when you need liquidity but don’t want to disturb your long-term investments. With flexible repayment terms, competitive interest rates, and a fully digital journey, it offers both speed and simplicity.

But it’s essential to weigh the risks, especially if the market is volatile or if you’re unsure about timely repayments.

Check your eligibility today and see how Quicklend can help you access funds without compromising your financial future.

This is general guidance. For personalized loan advice, contact our advisors.