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In most cases, a myriad of people encounter unexpected expenses such as medical emergencies, educational funds, personal endeavours and much more, due to which they are forced to cash their investments or take a loan against assets. In tandem with the rise of unsecured loans, requiring no collateral, Loans Against Mutual Funds have emerged as a game-changer, offering borrowers instant financial assistance without having to liquidate their investments.

Maintaining Investment Portfolio without Early Redemption

First and foremost, Loans Against Mutual Funds (LAMF) allow investors to keep their investment portfolio intact, becoming a crucial asset in the long-term or in situations wherein the specific investments are packed with sentimental value. Furthermore, investors depending on MFs to accomplish their future goals, by taking a LAMF are bestowed with the opportunity to prevent early redemption and continue on a journey of swelling investments.  

Lucrative Interest Rates

Doubting the scaling popularity of LAMFs is going to get you nowhere, because their alluring interest rates have made them the most enticing borrowing option. Typically ranging from 9% to 11%, LAMFs offer an attractive interest rate which is much lower than those linked with personal loans or credit cards. Lower interest rates in future will culminate into substantial savings on interest payments, making these loans a viable choice. 

Expedited Approval 

The entry of NBFCs and Fintechs in the realm of lending space have significantly altered the exhaustive process of loan approval from its foundational essence. Transforming it into a swift and hassle-free process, by integrating it with dynamic platforms, loan approval has become a seamless experience. Thus, the accelerated efforts made by the fintech industry has not only reduced the waiting time underlying loan applications, but also made it a convenience-centric journey.

Mirroring Overdraft Facility

Loans Against Mutual Funds mirror the essence of an Overdraft facility, mimicking it in terms of functionality. Allowing borrowers to repay the loan amount at their convenience, LAMFs have opened new avenues in the realm of flexibility. Additionally, in the absence of stringent repayment schedules, borrowers can leverage this flexibility to tailor repayment schedules according to their requirements, delivering an unparalleled personalization experience.

Being Tax-Conscious

Loans Against Mutual Funds pose to be a better alternative than other options because they are tax-optimised. As LAMFs allow borrowers to access loans without having to liquidate their assets, they fail to trigger any capital gain taxes that may occur in cases of redemption. Thus, investing and taking a Loan Against Mutual Fund is not only a smart decision, but offers borrowers the possibility to maximise returns, translating in lowered overall tax liability.   

Bottomline 

In hindsight, taking a loan against mutual funds not only adds emphasis on informed decision-making but offers borrowers an opportunity to meet immediate expenses within minutes. From attractive interest rates, flexible repayments, instant approval and much more, LAMF is poised to become a disruptive force in the coming years. However, before taking any financial decision, it’s essential to consult financial advisors, as the path towards financial well-being lies in aligning decisions with future-goals.      

(Atul Garg is the Founder of FinEzzy.)

(Disclaimer: Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited.)