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Loan Against Mutual Funds (LAMF)

Loan Against Mutual Funds (LAMF)

A Loan Against Mutual Funds (LAMF) lets you pledge your mutual fund units as collateral to borrow money without selling the holdings. You keep ownership of the units; the lender gives you a loan (or overdraft/line) based on the NAV of the pledged units.

How Loan Against Mutual Funds (LAMF) it works

  • Check eligibility & eligible schemes
    Not every mutual fund scheme or platform is accepted. Banks/NBFCs list eligible AMCs/schemes (some accept only CAMS-registered schemes, some only their own AMC). Confirm before applying. 

  • Choose lender & product
    Pick a bank, NBFC or fintech that offers Loan Against Mutual Funds (LAMF)  (many offer overdraft facilities or loan-against-securities products). Compare LTV, interest rate, fees and tenure. Typical interest ranges vary by lender and profile. 

  • Apply & submit documents
    Apply online/branch. Usual documents: identity, PAN, bank account, mutual fund folio details (and matching PAN/name), proof of holdings (CAMS/KFin/statement). Some lenders require you to have the MF units registered with specific registrars (CAMS/KFin). 

  • Pledge/creation of lien
    Lender places a lien/pledge on the mutual fund holding (electronically via registrar — not a physical handover). Your folio shows the pledge; you still earn dividends and benefit from NAV changes. LTV (Loan-to-Value) calculation & sanction
    Lender values your pledged units at current NAV and applies an LTV margin. Typical LTVs:

    • Equity / hybrid / ETFs: ~50% (i.e., you can borrow up to ~50% of NAV).

    • Debt / FMP / liquid funds: higher, sometimes up to 75–80%.
      Exact % depends on lender and fund type. 

  • Disbursal
    Loan is disbursed (or overdraft limit created) into your bank account. Many lenders charge interest only on the amount you actually use (for overdrafts). Ongoing monitoring / margin calls
    If NAV of pledged units falls and your outstanding loan exceeds allowed LTV, the lender may ask for additional margin (top-up) or partially liquidate pledged units to bring the account within limits. This is the main operational risk. Repayment and release
    Repay principal + interest per the agreement (monthly interest, EMIs or overdraft settlements). Once fully repaid, the lender removes the pledge and units are free.

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