What is Loan Against Mutual Funds?

A Loan Against Mutual Funds (LAMF) allows investors to leverage their mutual fund investments to meet short-term financial needs without selling them. This type of loan is typically offered by banks and financial institutions, where the mutual funds serve as collateral. The process is straightforward: lenders assess the value of the mutual funds and provide a loan amount, usually a percentage of the fund's current market value.

One of the key benefits of a loan against mutual funds is that it enables investors to access liquidity while retaining ownership of their investments. This means they can continue to benefit from any potential appreciation in the fund's value and earn dividends or interest. The interest rates on these loans are generally lower than unsecured loans, making them an attractive option for managing financial emergencies, funding business needs, or exploring new investment opportunities.