Understanding Loan Against Your Mutual Funds (LAMF)

Ever had to sell your mutual funds just to manage an emergency? Watching your portfolio sell can be disheartening, especially knowing it could have grown further. Now, there’s a smarter way. A Loan Against Mutual Funds (LAMF) lets you borrow money using your existing mutual fund investments, without selling them.

What is a Loan Against Mutual Funds?

Think of it as a secure way to borrow money where your mutual fund investments act as collateral. Instead of selling your investments, you pledge them to a lender for a loan. You get the money you need, while your investments remain invested. This loan gives you a flexible credit line based on your mutual funds. You can withdraw money as needed and only pay interest on what you have used every month. Just like a credit card, a bill will be generated monthly for the outstanding interest amount. You can pay back the principal amount at any time!

This means you can manage immediate financial needs without disrupting your long-term financial strategy.

Why Choose LAMF?

Here’s why you may want to take a loan against your mutual funds:

• Low-interest rates, lower than personal, gold, and other unsecured loans.
• No fixed EMIs, pay interest only on what you withdraw.
• Repay and withdraw again, a flexible credit line.
• Pledge funds as collateral and get cash without selling your mutual funds.
• Funds stay invested, so you continue earning returns, as the case may be, on your funds.
• Unpledge anytime and close your loan for free.

Who Provides the Loan?

On the PhonePe App, loans are offered by RBI-regulated lenders, partnered with PhonePe Lending Services Pvt. Ltd. Lenders determine your eligibility based on your fund type, market value, and LTV ratios.

How is Loan Eligibility Calculated?

As per RBI guidelines, lenders provide loans based on the current market value of your mutual funds. The eligible loan amount is calculated using a Loan-to-Value ratio, which varies by fund type, equity, debt, or liquid. Typically, lenders offer up to 50% of your portfolio value as a loan. So, if your eligible MF portfolio is ₹4,00,000, you may get a loan up to ₹2,00,000 (subject to LTV and lender specific policies).

Things to Keep in Mind

• Not all mutual fund schemes are eligible (e.g., ELSS, Demat MFs may not qualify)
• The eligible loan amount may change daily based on market movement.
• You need to pay only interest before the 7th of every month. 
• You can repay the principal and withdraw it again at any time for free. 
• This loan account is valid for 3 years. 
• You can close the loan anytime for free by repaying your dues, and your pledged funds will be released.

How to Apply on PhonePe

1. Open PhonePe app → Go to Loans → Tap Loan against Mutual Funds
2. Enter PAN and check loan offer
3. Complete KYC and set up AutoPay 
4. Confirm pledge, accept loan agreement, and get instant disbursal

Unlock the Power of Your Portfolio

Apply now on the PhonePe app and experience the smart, secure, and seamless way to borrow with Loan Against Mutual Funds.

Disclaimer: Opinions expressed and information provided here are for educational and reference purposes only and are not to be considered as financial or legal advisory. Please reach out to your financial institution, Credit Information Companies, and/or financial advisor before taking any steps/actions. PhonePe Lending Services Private Limited does not confirm or warrant for any correctness or validity of the credit information provided by the credit information companies and/or any information provided here under independent research. The banks and lenders are not responsible for any content posted on this site and do not endorse or guarantee any reviews.