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What Happens If You Fail to Repay a Loan Against Mutual Funds?
LAMF provides financial breathing room without forcing asset liquidation.
If you fail to repay the principal or interest, the lender can invoke the lien and instruct the AMC or RTA to redeem your pledged mutual fund units. This may force a sale at low market prices, trigger unexpected capital gains tax, and impact your credit score by 50 - 100 points. In 2026, many digital lenders liquidate holdings once dues cross 90 days.