Maximizing Your Financial Potential: Mutual Fund Loan vs. Personal Loan – Which is Better?
Mutual fund loans typically offer interest rates ranging from 10% to 12% annually, whereas personal loans can carry interest rates of 15% to 20%, depending on various facts.
Are you Seeking a Loan?
Unlocking the Power of Mutual Funds: A Smarter Borrowing Option
When you opt for loans against mutual funds, you leverage your mutual fund investments as collateral with a financial institution. Since these loans are asset-backed, they usually come with lower interest rates, typically ranging from 10% to 12% per annum. In contrast, personal loans often carry higher interest rates, typically around 15% to 20%, depending on various factors.
Remember that while your mutual fund units are pledged as collateral, you won’t be able to redeem them until the loan is fully repaid. In case of default, the bank or financial institution reserves the right to save the units.
Where to Apply?
Banks extend loans against approved mutual funds, which involve an agreement granting the bank ownership, selling, and holding rights over your investments. The institution retains the authority to sell your fund holdings in the event of defaults or non-payment of the loan. Typically, the loan amount limit is around 50% to 60% of the net asset value of the pledged mutual fund units in the case of equity investments. please consult with your financial adviser and loan adviser bank.
Why Opt for Loans Against Mutual Funds Over Personal Loans?
Loans against mutual funds offer lower interest rates due to the collateral, typically 10-12%, compared to higher interest rates of 15-20% for personal loans, which depend on income.
Low-Interest Rate
Loans against mutual funds offer lower interest rates (10-12%) due to collateral, compared to personal loans (15-20%) based on income, clarified.
Investment Remains Intact
One significant advantage of loans against mutual funds is the preservation of your investments. While your SIP contributions and additional investments continue to grow your mutual fund holdings, if the NAV increases, you can request your bank to adjust the interest rates or make partial loan repayments.
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