What is Loan Against Mutual Funds? LAMF Benefits, Eligibility & More

Mutual funds have long been a preferred choice for Indian investors aiming to build wealth steadily over time. They offer diversification, professional management, and access to market-linked returns. However, life is unpredictable, and financial needs can arise unexpectedly.

Selling mutual funds in such situations may not be the wisest move especially if markets are down. Instead, you can consider a loan against mutual funds (LAMF). This option provides quick access to funds while keeping your investments intact. Let’s look at this way of financing more closely. 

What is a Loan Against Mutual Funds?

A loan against mutual funds allows investors to borrow money by pledging their mutual fund units as collateral. You don’t have to sell your investments. Instead, the lender places a lien on select units in your portfolio.

While your units are pledged, they remain invested. Their market value continues to rise or fall as usual. The only restriction is that you cannot sell those pledged units until the loan is repaid or closed.

Advantages of Taking a Loan Against Mutual Funds

• Investments Remain Active: Your mutual fund units continue to grow in value while pledged.
  
• Lower Borrowing Costs: Interest rates are significantly lower. For example, with Dhanush, the interest is starting at 10.49% p.a., that too only on the amount used.
  
• Interest on Usage Only: Most lenders offer overdraft-style loans, where interest is charged only on the amount used.
  
• Fast Disbursal: Funds are typically credited to your bank account within 24 hours.
  
• Minimal Paperwork: KYC and fund verification are usually enough.
  
• Flexible Repayment: Repay what you use, when you choose. No fixed EMIs in most cases.

Eligibility and Loan Amounts

To qualify, you must hold mutual funds in your name and be KYC compliant. The value and type of your holdings determine the loan limit.

• Minimum Loan: ₹25,000
  
• Maximum Loan: Can go up to ₹20 lakh or higher in most cases
  
• Minimum Portfolio Size: Generally ₹50,000 or more 

How to Apply for a Loan Against Mutual Funds on Dhanush

Here’s a quick overview of the application process:

Dhanush: Loan Against Mutual Funds in Minutes

Dhanush offers a streamlined way to borrow against your mutual funds with zero paperwork and no credit checks. Designed for modern investors, this feature is fast, secure, and completely digital.

Key Features:

• Interest rates starting at 10.49% p.a.
  
• Loan approval and disbursal in under 15 minutes
  
• Interest-only repayments, no rigid EMIs
  
• Credit line up to ₹2 crore, based on portfolio value
  
• Works with 6000+ mutual fund schemes
  
• 100% eligibility for KYC-compliant investors
  
• No credit score required
  

The application process is app-based and simple. Enter your details, link your portfolio and pledge units, and get cash in minutes—without selling your investments

Get more details on the LAMF feature on Dhanush here.

Conclusion

A loan against mutual funds offers a practical way to handle short-term financial needs without derailing your investment plan. It’s quick, cost-effective, and keeps your long-term goals on track. Platforms like Dhanush make the process even easier by offering instant approvals, zero paperwork, and flexible repayment options.