You can take a loan against mutual fund units. Keep the following five things in mind.
Welcome to FundooMoney, your 24X7 buddy for all your money matters. The script of life is such that it can have unpredictable twists and turns. Not all of them can be pleasant. This means an emergency or any other urgent requirement for cash may force you to consider liquidating well-performing investments such as those in mutual funds.
A smarter idea is to not to do that since you might make a loss during redemption of units or suffer from an interruption in your investment effort for major future needs like child’s higher education. You can take a loan against mutual fund units. This is less costly than a personal loan or taking credit card debt. If you want to know how to get such a loan, stay tuned.
There are five things you need to know when looking to get a loan against mutual fund units.
• Maximum loan amount is typically up to 50% of the prevailing net asset value (NAV) of all pledged equity mutual funds
• Interest rate offered on this loan is generally lower than an unsecured personal loan
• The lender may decide upon the loan based on quality of your mutual fund portfolio
Mutual fund performance holds key to the loan amount. Stable and consistently performing mutual fund investments can help you get a higher loan amount.
• You will have to allow the lender to mark lien partially or fully. This will prevent you from selling these units till the loan is repaid
• If you have invested in a dividend option, you can keep receiving the dividends. However, you can sell the units only on the repayment of the loan.
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