For investors, liquidity is as crucial as wealth creation. For professionals and business owners, the dilemma often lies in choosing between liquidating high-performing investments or taking high-interest personal loans. Loan Against Mutual Funds (LAMF) bridges this gap, allowing you to access capital without disrupting your compounding journey. However, the amount of capital you can unlock is heavily dependent on how your portfolio is structured.

Lenders and NBFCs evaluate risk based on volatility and asset class. If your goal is to increase loan eligibility and optimize your portfolio structure for LAMF, you must understand the nuances of Loan-to-Value (LTV) ratios and approved security lists. This guide provides a strategic breakdown of portfolio structures designed to maximize your borrowing power.

1. High-Concentration Debt Portfolios

Debt mutual funds are the preferred collateral for most lenders due to their lower volatility compared to equity markets. By shifting a portion of your wealth into high-quality debt instruments, you significantly boost your borrowing ceiling.

Most financial institutions offer a much higher LTV for debt funds, often ranging from 75% to 85% of the Net Asset Value (NAV). In contrast, equity funds usually cap out at 50%. If you have a ₹10 lakh portfolio in debt funds, you could potentially access ₹8 lakh, whereas the same amount in equity would only grant you ₹5 lakh. 

To increase loan eligibility, consider incorporating Liquid Funds, Money Market Funds, or Corporate Bond Funds from top-tier Asset Management Companies (AMCs).

2. The Balanced Hybrid Structure

Hybrid funds, specifically Aggressive Hybrid or Balanced Advantage Funds, offer a "middle ground" for eligibility. Lenders view these as diversified risks, often granting an LTV of 60% to 70%.

This structure is ideal for investors who want the growth of equity but need a higher loan eligibility than what pure equity provides. Because hybrid funds automatically rebalance between asset classes, they maintain a more stable NAV during market corrections. This stability reduces the risk of "margin calls", where a lender asks you to pledge more units because the value of your existing collateral has dropped. A well-balanced hybrid structure ensures you stay within the portfolio structure for LAMF that banks favor for long-term overdraft facilities.

Comparison of LTV by Fund Type

Fund Category

Average LTV %

Eligibility Impact

Debt Funds

75% - 90%

Very High

Hybrid Funds

60% - 70%

Moderate to High

Equity Funds

50%

Moderate

Small Cap/Sectoral

30% - 40%

Low

3. Large-Cap Dominant Equity Allocation

Not all equity funds are treated equally. If your equity portfolio is heavy on Small-Cap or Sectoral funds (like IT or Pharma), lenders may either reject the pledge or offer a significantly lower LTV.

To increase loan eligibility, your equity allocation should focus on Large-Cap funds or Index Funds. These are considered blue-chip assets. Lenders maintain an "Approved List of Securities," and Large-Cap funds from the top 10 AMCs are almost always on it. By structuring your equity around the Nifty 50 or Sensex-weighted funds, you ensure that your portfolio is recognized as high-quality collateral across multiple lending platforms.

4. Multi-AMC Diversification Strategy

Lenders often have "per-scheme" or "per-AMC" exposure limits to mitigate their own risk. If 100% of your portfolio is with a single AMC, a lender might cap your loan amount regardless of your total NAV.

A smarter portfolio structure for LAMF involves spreading your investments across three to four major AMCs (e.g., SBI, HDFC, ICICI, and Axis). This diversification signals to the lender that your portfolio isn't vulnerable to the operational risks of a single fund house. It allows you to maximize the total lien-marking capacity of your holdings, often leading to a higher overall credit limit in an overdraft account.

5. Non-ELSS Core Component

Equity Linked Savings Schemes (ELSS) are popular for tax saving, but they are the "kryptonite" of LAMF eligibility during their lock-in period. Units that are under the mandatory 3-year lock-in cannot be pledged as collateral.

If you are planning to use your investments for future liquidity, avoid over-allocating to ELSS once your tax-saving limit is met. Shift the surplus to Flexi-cap or Multi-cap funds. By ensuring your core portfolio consists of open-ended, non-locked-in units, you maintain 100% "pledgeable" status. This simple shift in portfolio structure for LAMF can be the difference between getting a loan in hours versus waiting three years for units to mature.

6. The "Blue-Chip" Concentration for Quick Approval

Digital LAMF platforms use automated risk-assessment engines. These engines are programmed to instantly approve "Blue-Chip" portfolios.

  • Top 50 Stocks Focus: Portfolios tracking the Nifty 50.

  • AUM Significance: Funds with a large Asset Under Management (AUM) are preferred because they are highly liquid.

  • Low Tracking Error: For index funds, a lower tracking error increases lender confidence.

Structuring your portfolio with these "institutional favorite" funds ensures that your application bypasses manual intervention, speeding up the time it takes to increase loan eligibility from days to minutes.

7. Systematic Transfer Plan (STP) Anchoring

If you have a large lump sum to invest but need liquidity, use an STP. Park the funds in a Liquid Fund (Debt) and systematically transfer them to Equity.

While the money is in the Liquid Fund, your loan eligibility is at its peak (up to 90% LTV). As it moves to Equity, the LTV gradually reduces to 50%. This structure provides a "liquidity cushion" during the early stages of your investment journey. It is a highly strategic portfolio structure for LAMF for entrepreneurs who want to keep their business capital productive while maintaining the ability to withdraw it for working capital needs.

8. High-Liquidity Overnight Fund Buffers

Overnight funds invest in securities that mature in one day. While their returns are modest, their risk profile is near zero. Lenders view these as equivalent to cash.

By keeping a 10% to 15% buffer of your total portfolio in Overnight or Liquid funds, you provide "collateral insurance." If the equity market crashes by 20%, the stable value of your debt buffer prevents the total collateral value from falling below the minimum threshold. This prevents forced liquidation of your units and allows you to increase loan eligibility by demonstrating a lower overall portfolio beta.

9. Avoidance of Thematic and Sectoral Volatility

Thematic funds (e.g., Defense, PSU, or ESG) might offer stellar returns, but they are often excluded from a lender’s approved list due to high concentration risk.

To maintain a high portfolio structure for LAMF, keep thematic bets to less than 20% of your total holdings. Most lenders will only lend against "Diversified Equity." If your portfolio is too "niche," you may find that only a small fraction of your total wealth is eligible for a loan. Prioritizing diversified Flexi-cap funds ensures that every rupee you invest contributes toward your borrowing power.

10. Direct Plan vs Regular Plan Consistency

While it doesn't affect the LTV percentage, the higher NAV of Direct Plans (due to lower expense ratios) technically increases your loan amount for the same number of units.

Lenders calculate eligibility based on the current NAV. Over 5-10 years, a Direct Plan can have a significantly higher NAV than a Regular Plan. By consistently choosing Direct Plans, you naturally increase loan eligibility over time as your "pledgeable value" grows faster. Ensure your portfolio is cleaned of any "orphan folios" or small, scattered investments to make the digital lien-marking process seamless.

Key Takeaways for Maximizing Your LAMF

To ensure you get the best terms, your portfolio should balance growth with "pledgeability." Follow these guidelines:

  • Maintain a 70:30 Equity to Debt ratio for balanced LTV.

  • Stick to AMCs with more than ₹50,000 crore in AUM.

  • Avoid sectoral funds for the core 80% of your portfolio.

  • Use discvr.ai to track which of your current funds are "pledgeable."

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Ready to see how much you can borrow? Explore the LAMF product on discvr.ai today and unlock liquidity without compromise.