Ever encountered an unexpected cost and found yourself reluctant to touch your mutual fund investment? It could be anything from redecoration of your house to your child’s education, or even something as urgent as a medical procedure. 

The good news is that you no longer have to redeem your mutual funds to access cash.

Your investments can still earn returns while you access funds when you need them the most.

In this blog, we will explain, step-by-step, how to apply online for a Digital Loan Against Mutual Fund at South Indian Bank.

• What is Loan Against Mutual Funds? 

You can borrow against a Mutual Fund by placing your mutual fund units as collateral without selling them. This is a form of secured credit line that you can access instantly while keeping your mutual funds untouched. 

• Why are Loan Aganist Mutual Funds a better option? 

Loans aganist your mutual funds are a great option because, compared to an unsecured personal loan, they have lower interest rates. Moreover, this digital loan allow you to instantly access cash while preserving the potential growth of your investments. 

• Who Is Eligible For A Loan Against Mutual Fund? 

1. Age Restrictions: Anyone between the ages of 18 and 75 is qualified for a loan against a mutual fund.
2. Minimum Holding Requirement: To be eligible for the loan, you must have a minimum mutual fund holding of ₹1 lakh.

• What are the prerequisites for a Loan Aganist Mutual Fund ?

1.You must hold eligible units of Mutual Funds approved by a lending institution.

Lenders accept: 

1. Equity Mutual Funds
2. Debt Mutual Funds

Your KYC should be verified as per SEBI guidelines. This includes submitting:

1.  PAN Card
2.  Address proof

You should provide consent by completing an online request form to pledge your mutual fund units. The Asset Management Company (AMC) will then approve the pledge to the lender.

4. What are the Loan Limits Depending on the Type of Mutual Funds?

1. Equity Mutual Funds: Up to 50% of the mutual fund value.
2. Debt Mutual Funds: Up to 70% of the mutual fund value.

• Key Advantages of Taking a Loan Against Mutual Fund

1. The process is fully digital through VKYC(Video KYC) – no physical documents or branch visits required.
2. You will receive your loan in less than 15 minutes. (Subject to Eligibility)
3. You can enjoy Competitive rates.
4. You pay interest solely on the amount utilised.
5. You can maintain your investment and avoid liquidating the fund.

• What is the Process to Secure a  Loan Against Mutual Fund Online?           

Step 1: Register and Confirm Your KYC. 

1. Complete KYC using your PAN and Aadhaar.
2. Ensure that your mutual funds are held under CAMS or KFintech. 

Step 2: Choose Which Mutual Funds You Would Like to Pledge. 

1. Select from your account’s eligible mutual funds.
2. The loan cap will be set based on the value of your pledged funds.

Step 3: Approve the pledge using CAMS or KFintech 

1. You will be taken to the appropriate portal. 
2. Make pledges and secure your units within minutes. 

Step 4: E-Sign Agreement

1. Check the loan offer and sign the agreement with an OTP.

Step 5: Verify Bank Account & Set E-Mandate

1. Connect your bank account for the disbursal. 
2. Establish an e-mandate for auto-debit of interest or repayment if you wish.

Step 6: Get Funds in 15 Minutes

1.  The loan amount will be available in the account as an overdraft.

• Frequently Asked Questions

1. Will I continue to earn returns on my mutual funds while they’re pledged?

1. You continue to earn returns on your mutual fund investments as the units are retained.

2. What if I don’t repay the loan on time?

1. In case of default, the lender can recover dues by selling the pledged units, which allows for the recovery of defaulted secured loans.

3. Is the loan accessible for SIP investments? 

1. Yes, as long as they are not ELSS or close ended funds (Locked Funds)

• Make Your Money Work Harder Without Letting Go

A Digital Loan Against Mutual Funds is perfect for anyone who wants a short-term cash solution without compromising long-term financial growth. It’s quick, digital and doesn’t disturb your investment journey.

• Why sell when you can pledge?!

Apply online and unlock the value of your mutual funds in just a few minutes!

Disclaimer: The article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of The South Indian Bank Ltd. or its employees. The South Indian Bank Ltd and/or the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial/non-financial decisions based on the contents and information’s in the blog article. Please consult your financial advisor or the respective field expert before making any decisions.