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Loan against mutual funds emerges as alternative to personal loans for investors
Loans against mutual-fund holdings provide investors liquidity while retaining units, with LTVs of up to 80 % for debt funds and risk of margin events.
Investors in India are increasingly turning to loans against their mutual-fund holdings rather than redeeming them to meet short-term liquidity needs. Platforms offer up to 50 % of net asset value (NAV) for equity funds and up to 80 % for debt funds. Borrowers continue earning returns on pledged units and pay interest only on the drawn amount. Financial advisers caution that market-value drops could trigger margin calls or forced sales.
The mechanism highlights evolving secured-credit options in wealth management.