What is instant loan available against mutual funds?
Mutual Fund Instant Loan: Mutual funds are considered an effective investment tool to build a large corpus in the long term. There are many benefits of investing in mutual funds. In this you get attractive returns of the stock market but it does not have the headache like the stock market. Mutual fund is not only a great investment tool but also helps in getting instant loan in case of need of money. Today we will learn some important things about instant loans available through mutual funds.
What is instant loan available against mutual funds?
Instant loan against mutual funds is a way to get an instant loan by giving your mutual fund units as collateral. This type of instant loans are offered by NBFCs as well as many banks. The amount available in this type of loan depends on the current value of your mutual fund portfolio. If you have equity based mutual fund units then you will get comparatively less money as loan. But if you have debt based mutual fund units then you can get more loan. Let us now know about some of the major advantages and disadvantages of instant loans available on mutual funds.
advantages
Instant loans available against mutual fund units are processed very fast. It does not involve much paper work and considering the current value of your portfolio, it gets approved quickly and you get the loan amount soon. The ownership rights of your mutual fund units that you have pledged for the loan remain with you and you also get the dividend and interest received on it. In this, you can ask for time to return the loan money as per your convenience. In this type of loan, you have to pay less interest as compared to personal loan.
Loss
The value of a mutual fund portfolio entirely depends on the fluctuations in the stock market. If there is a prolonged decline in the market, the value of your portfolio may also decline and the loan to value ratio may also be adversely affected. Additionally, the bank can liquidate the mutual fund units pledged by you to recover the loan in case of default.
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