Loan Against Mutual Fund

Loan Against Securities (LAS) is an innovative financial product designed to provide liquidity to investors without requiring them to sell their securities. It is a secured loan where securities such as shares, ETFs, and mutual funds are pledged as collateral. This facility allows investors to leverage their investment portfolio to meet their short-term financial needs while continuing to benefit from potential capital appreciation of their investments.

A LAS is a type of secured loan offered by banks and financial institutions, enabling investors to borrow funds against their existing securities. By pledging their securities as collateral, investors can obtain a loan, typically a percentage of the market value of the pledged securities, which can be used for various purposes. The loan amount varies depending on the type of security pledged and the lender’s policies. It is tailored for those who need quick access to funds but do not wish to liquidate their investments.

Options available with LAS

LAS offers a range of options tailored to suit different financial needs and preferences

Types of Securities
Loans can be availed by pledging different types of securities such as equity shares, mutual fund units, and ETFs.
Loan Amount and Tenure
The loan amount is generally a percentage of the market value of the pledged securities, varying from 35% to 80%, depending on the type of security and lender policies. The tenure of the loan is flexible, ranging from a few months to up to five years, as per the product and lender’s policy.
Interest Rates and Repayment
Interest rates on LAS are typically lower than those on unsecured personal loans, as the loan is backed by collateral. The interest charges and repayment options are usually as per the lender’s policy, with flexible options often available.
Types of Loans
Usually, one can avail products such as (a) Term Loans, (b) Consumer Loans, and (c) Flexi-loans, depending on the lender. These products typically vary in nature and can be chosen according to the needs of the customer.

Why opt for LAS?

Taking a LAS instead of an unsecured personal loan offers multiple advantages, such as

Quick Access to Funds
LAS provides immediate access to funds without the need to sell your investments. This is particularly useful in times of urgent financial needs or unforeseen expenses.
Continued Investment Benefits
By pledging securities instead of selling them, investors continue to benefit from potential capital appreciation, dividends, and interest income of the underlying assets. This ensures that the long-term investment strategy remains intact.
Lower Interest Rates
LAS typically offers lower interest rates compared to unsecured loans and credit cards, as the loan is secured by collateral. This makes it a cost-effective borrowing option.
Flexible Repayment Options
Flexible repayment terms are generally offered, allowing borrowers to manage their cash flows effectively without straining their finances.

Who should consider taking LAS?

LAS is suitable for a wide range of individuals and businesses with different financial needs and objectives

Business Owners
Business owners can utilise LAS for working capital requirements, business expansion, or managing cash flow gaps without liquidating their investment portfolio.
High Net-Worth Individuals (HNIs)
HNIs with substantial investment portfolios can leverage LAS to quickly access large sums of money for investment opportunities, real estate purchases, or luxury expenditures.
Short-Term Borrowers
Individuals who need short-term funds for personal expenses such as weddings, medical emergencies, travel, or even buying consumer goods can benefit from quick disbursal and lower interest rates.
Investors Seeking Liquidity
Investors who want to maintain liquidity while keeping their long-term investments intact can use LAS to meet their immediate financial needs without selling their securities.

With NJ E-Wealth Account, you now get easy and convenient access to LAS as per your requirements. Get in touch with your NJ Wealth Partner to know more.