5 Things You Need To Know About Loans against Mutual Fund Investments

1. 5 Things You Need To Know About Loans against Mutual Fund Investments

2. You often run into financial emergencies that require immediate funds or cash. In such circumstances, you can manage your immediate liquidity needs with your savings. However, if your savings are locked into different investments, then withdrawing money from them can result in penalties. Additionally, you may be hesitant to trade your stocks or mutual funds as it may upset your financial goals or cause you to lose your long-term wealth-building potential.

3. You often run into financial emergencies that require immediate funds or cash. In such circumstances, you can manage your immediate liquidity needs with your savings. However, if your savings are locked into different investments, then withdrawing money from them can result in penalties. Additionally, you may be hesitant to trade your stocks or mutual funds as it may upset your financial goals or cause you to lose your long-term wealth-building potential.

4. Thus, the other option to face your financial crisis is to get loans and this is the best digital solution for loan against mutual funds. You can opt for secured or unsecured loans. You can use mutual funds as collateral for secured loans. • SOME MORE THINGS TO KNOW ABOUT MUTUAL INVESTMENT LOANS:

5. 1. YOUR EXISTING SUMA LUMP OR SIP INVESTMENTS IN MUTUAL FUNDS REMAIN UNAFFECTED. • You can hold your mutual fund investments and commit them to a bank or NBFC for a loan. Based on the current value of your mutual fund and the investment term, a loan will be sanctioned. • However, in the event of a loan default, the bank will exercise its lien and redeem the mutual fund units through the fund house. The redemption amount will be used against your loan. Conversely, if you repay your loan, the fund house will revoke the bank's lien on the pledged mutual fund and return the collateral to you as soon as it receives a confirmation from the bank. • In short, a mutual fund loan does not affect your ownership rights in the mutual fund units. The bank will sell them only if you fail to service your loan on time.

6. 2. AMOUNT OF THE LOAN • Many banks specify the minimum and maximum amount you can borrow against their mutual funds. However, loan limits vary from bank to bank. Generally, you can borrow up to 50% of the value of the pledged equity fund units and 70% to 80% of the value of the pledged debt fund units.

7. 3. INTEREST RATE • Secured loans have lower interest rates than unsecured loans, since secured loans are asset backed. Because mutual fund loans are asset-backed, they attract a nominal interest rate (based on prevailing market conditions). If you have a good credit score, you can borrow at lower rates.

8. 4. LOAN APPLICATION PROCEDURE • First, you must open a checking account with an overdraft service. You can borrow up to the stipulated overdraft limit by committing your mutual fund units. • Second, you must complete the loan application form and place a lien to the bank on the committed mutual fund units. You must provide details such as folio number, number of units, mutual fund name, scheme, etc. • Third, the completed application form will be sent to the mutual fund registrar along with the necessary documents. The registrar will mark the bank's lien on the committed mutual fund units.

9. 5. TAKING LOANS AGAINST MUTUAL FUNDS SHOULD BE THE LAST OPTION • One of the investment myths surrounding mutual funds is borrowing against them in any market condition. However, since mutual funds are subject to market fluctuations, you can borrow against them only when the markets are in a declining phase. During the growth phases of the market, it may be better to redeem your funds rather than take out a loan.

10. LAST WORDS • These were some investment facts and myths about mutual fund loans. You may also be aware that you cannot redeem your mutual funds until your debts are settled, as the lender has a lien on them as digital lien marking for banks. You can check the list of approved fund houses before applying for a loan with any lending institution. • The information provided in this document is intended for general reading purposes only and the views expressed constitute opinions only and, therefore, cannot be construed as guidelines, recommendations or a professional guide for readers. The document has been prepared on the basis of publicly available information, internally developed data, and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, affiliates or representatives ("entities and their affiliates") do not assume any responsibility or guarantee the accuracy, completeness, adequacy and reliability of such information. • Recipients of this information are advised to rely on their own analyzes, interpretations, and research. Readers are also advised to seek independent professional advice in making an informed investment decision. The entities and their affiliates, including the persons involved in the preparation or issuance of this material, shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of loss of profits. arising from the information contained. In this material. The recipient will be solely responsible for any decision made on the basis of this document.

11. About Us • CAMS’ paper-less solution streamlines loan approval and lien marking processes. It leverages the myCAMS portal to provide a seamless experience to your end customers who have invested in CAMS serviced Mutual Funds. The solution brings access to schemes of 17 Mutual Funds clients serviced by CAMS. • Website - https://www.camsonline.com/Business/LoanAgainstMF