- 1 Loan against Mutual Funds
- 2 How to loan from mutual fund investment
- 3 Can take advantage of the loan facility from mutual fund (Eligibility)
- 4 What is CMS
- 5 How to Apply for HDFC Digital LAMF Loan
- 6 Take care of these things.
- 7 What is the interest rate of HDFC Bank Mutual Fund (HDFC Digital LAMF)
- 8 What will happen if the value of my investment falls after taking a loan
- 9 What should you do?
Loan against Mutual Funds
If you want an urgent loan, then you have few limited options. You can take a personal loan. Gold loans can buy. The insurance can take a credit from the policy or take a loan from the PPF account. This loan is available quickly, but there are some problems.
In your personal loan, your loan repayment capacity seen. Your credit score also examined. If the credit score is not good, then forget the personal loan.
You must have enough gold ornaments in the gold loan. No loan is available for every type of insurance policy and only loan up to 80-90% of surrender value is available. There is also a time limit for taking credit from a PPF account, after the expiry of 6 years, you cannot make a loan from a PPF account.
Note that you can expect to get a Gold Loan very soon, but it can take time to get a Personal Loan, Insurance Policy Loan or PPF Loan.
You have to see if any of the above loan options will work for you.
Apart from all these options, there is still another option. If you invest in mutual funds, then you can take a loan by pledge your mutual fund investment.
You can also do this with share. However, in this post, I will discuss loans from mutual funds.
How to loan from mutual fund investment
It usually takes time to take a loan from mutual funds. However, this time limit is gradually decreasing.
Some time back, HDFC Bank has started a facility where you can get loan money in your bank account in a few minutes. The name of this facility is Digital Loan against Mutual Funds (LAMF).
Today I will discuss this feature. Note that other banks also provide this facility, but I will talk about the loan of HDFC Bank.
Can take advantage of the loan facility from mutual fund
You must have a bank account with your HDFC Bank. Note that the other banks also provide loans with the money by investing your mutual fund. In this post, I am talking about HDFC Bank loan.
- You can apply online for a loan through Net Banking. Therefore, be sure that you have a net banking password.
- Now that you are thinking of taking a loan by mortgaging a mutual fund, you must have mutual fund investments too.
- You can take loans against only those mutual funds, which CAMS offers. We will talk about this later.
- Only the individual holdings will be a loan against the mutual fund statements. You will not get a loan against the investment that you have made in the common holding mode.
What is CMS
CAMS (Computer Age Management Services Private Limited) works as Registrar and Transfer Agent for many Mutual Fund Houses (or AMCs) in India. CAMS also provides infrastructure services to mutual fund companies. You can find more information about CAMS on the CAMS website.
The point is that CAMS, which provides service to the mutual fund company, keeps all the information about your investment with the Mutual Fund Company with CAMS. That is why CAMS plays an essential role in this entire loan process.
At the time of the loan application process, CAMS creates a pledge made by the chosen investment and by that HDFC Bank gives you a loan. Note that this whole process can also be offline, but in such a situation, it will take some time to get a loan.
Which companies provide CMS Services
- Aditya Birla Sun Life Mutual Fund
- DSP Blackrock MF
- HDFC Mutual Fund
- HSBC Mutual Fund
- ICICI Prudential Mutual Fund
- IDFC Mutual Fund
- IIFL Mutual Fund
- Kotak Mutual Fund
- L&T Mutual Fund
- Mahindra Mutual Fund
- PPFAS Mutual Fund
- SBI Mutual Fund
- Shriram Mutual Fund
- TATA Mutual Fund
- Union Mutual Fund
As mentioned above, only you can get Digital Loan against Mutual Funds against your investment in these mutual fund companies.
When you apply, you will automatically show which of your investment loans are eligible.
How to Apply for HDFC Digital LAMF Loan
As mentioned, you must have an HDFC Bank account, and Net Banking should enable for the account.
- First, log in Net Banking at HDFC Bank’s website.
- After logging in, you will need to log in to your CAMS account. If you have not created your account on the CAMS website, you can quickly create it in 5 minutes.
- After that, you can choose mutual funds from your portfolio, against whom you want to take a loan.
- You will be sent an OTP to activate the loan facility. You can get loan facility by putting OTP.
According to HDFC Bank, you will get a loan within 3 minutes.
Take care of these things.
- You can take a loan against both equity and debt funds.
- Your credit score will not make any difference. You can take this loan even if your credit score is terrible or not your credit history.
- This facility gave as an overdraft facility. Therefore, the amount you have taken, only the interest will be provided on interest. You can also withdraw money from the overdraft facility.
- For value, you have over 5 lakh overdraft facility. You withdraw 5 lakh rupees once and pay the amount after some time. After spending, you can withdraw up to Rs 5 lakhs.
- Unless you close the overdraft facility, you cannot sell your mutual fund investment.
6. In the situation of non-payment of the loan, the bank may also sell your investment.
How much loan can I get?
It has not explained clearly.
According to the laws of the Reserve Bank of India (RBI), banks cannot provide loans worth more than 50% of the equity mutual fund.
There is no limit set in the mutual debt fund. So if the value of your equity mutual fund investment is Rs 1 lakh, then the bank cannot give you a loan of more than Rs 50,000.
If you had a debt fund of Rs 1 lakh, you could expect more loans. Note that the rules of each bank can be different.
What is the interest rate of HDFC Bank Mutual Fund (HDFC Digital LAMF)
Loan rates can vary.
Interest rate 1 year MCLR + 2.3% p.a. Loan rate will be around 11%
What will happen if the value of my investment falls after taking a loan
In such a situation, the ability to withdraw money from your overdraft (drawing power) will reduce. For assuming you had pledge equity funds of Rs. 1 lakh and took a loan of Rs. 50,000. Later, the value of the investment falls to Rs 80,000.
In such a situation, your drawing power will be reduced from Rs 50,000 to Rs 40,000. If you have already withdrawn more than 40,000 rupees, then you may have to pay the penalty on an additional amount, or you can bring your outstanding balance up to Rs 40,000 by depositing money quickly.
You can visit HDFC Bank’s website for more information.
What should you do?
Return on your mutual fund investment is not guaranteed. However, interest rates will have to pay on a loan. You get 11-12% p.a. Interest will be paid. If your investment does not return more than 11-12%, then taking a loan will be stupid.
Getting so many returns in debt mutual funds is difficult. It can found in the equity fund, but there is no guarantee. In the equity fund, you may also harm.
That is why, according to me, you should sell your mutual fund investment instead of taking a loan against your mutual fund. Use the money you get when selling a mutual fund for your needs.
If needed, I will sell my mutual fund investment (I will not take a loan against them).
What would you do? Tell me in the comment below.