Wednesday, August 21News That Matters

Consider 5 Points Before Availing the Loan Against Mutual Funds

The loan against mutual funds is an incredible tool to get a large amount of money at an affordable rate of interest. If you have invested in mutual funds investment, and need some money, you can take a loan against it.

One of the major benefits of applying for a loan against mutual funds is:

  • Getting a large amount as high as up to Rs.10 crore
  • Continue to stay invested in the investment and don’t need to liquidate the assets

However, before you apply for the lowest loan against mutual funds interest rate in the town, you need to factor in some aspects. Knowing about the same can aid your loan application, processing, management and repayment dead easy. Read on!

Check out the credibility of your lender
Before applying for the loan against mutual funds account, you need to check the background of the lender. It is vital to know as it will help you to know if it can approve a loan request for the desired amount or not. Hence, before filling in the online application form of a lender, connect with its customer care and know all the details.

Ensure to check the lender’s eligibility criteria
Sometimes, if you don’t fulfill the lender’s eligibility criteria, they may not approve the loan. Hence, ensure to check a lender’s eligibility criteria. Some of the standard loan against mutual funds eligibility terms includes:

  • You should be an Indian citizen
  • Your age should be at least 21 years
  • You should either be a salaried or self-employed professional with a regular income source

The value of your collateral
Generally, the amount of loan required an applicant should not exceed the value of the assets that you wish to mortgage. Also, lenders may want the value of your mutual funds to be of such and such value for you to become eligible. Example – A leading lender may wish that the value of your mutual funds is at least Rs.35 lakh for you to apply for the loan. Hence, it becomes vital to know about it and then only apply for the loan to keep off rejection chances.

Your repayment capacity
Do you earn enough income and have the required repayment capacity to repay the about to be availed loan against mutual funds? It is extremely vital to know as it can assist you in determining if you can handle and repay the loan over a tenor or not. Sometimes, applying for a loan without knowing your repayment capacity can hurt your finances. As a result, it may lead you toward debt traps.

Check for any prepayment, foreclosure and other charges
After you have availed the loan against mutual funds, you may wish to make some prepayment or foreclose it before its scheduled tenor. Hence, ensure to check any fees charged by a lender including any other hidden charges. Most of the known names in the lending industry do not ask for fees for the loan prepayment and foreclosure.

The loan against mutual funds is a profitable option to access some higher amount at a lower rate and without liquidating your assets. You are now also aware of some considerations to make before applying for the loan against mutual funds facility. Being aware will now also help you manage the loan confidently.

Seema Gupta, a Delhi based experienced financial advisor. I am well known for my abilities to analyze the past & present market statistics and predict the future market trends of the finance sector. I have worked extensively in the finance sector and dealt with the entire range of secured investments and loans. I have earned expertise in helping different sections of society with the required knowhow while taking a loan against mutual funds, shares, FD and other types of mortgage schemes.