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Loan Against Mutual Funds gaining traction as secured borrowing option
Loans against mutual-fund units let investors borrow without redeeming holdings, offering up to 80 % LTV for debt funds and interest only on drawn amounts.
Loan Against Mutual Funds (LAMF) allows investors to pledge their mutual-fund units as collateral while continuing to earn returns. Banks offer up to 50% of NAV for equity funds and up to 80% for debt funds. Digital platforms enable fast approval and minimal documentation. Interest is charged only on the drawn amount and units continue to be held in the account.
Investors benefit from liquidity without redeeming holdings, but need to monitor collateral value to avoid margin calls or forced liquidation if fund value drops.