Synopsis: This article tells you how smart investors use LAMFs, why they’re a better choice than personal loans, Understanding Margin Calls, and the best platforms to secure LAMF loans.
If you need money and are thinking of selling your mutual funds, wait! Instead of taking a personal loan with high interest, you can go for a Loan Against Mutual Funds (LAMF), it’s a smarter and cheaper option for you. Loan Against Mutual Funds (LAMF) means you can take out a loan by using your mutual fund units as security instead of selling them. Instead of liquidating your portfolio during financial emergencies, LAMF enables you to tap into your investment value while your funds continue earning returns.
Why LAMF is the Smart Choice
1. Gives you a lower Interest Rate
Lower Interest compared to personal loans, LAMF typically range from 10.5% to 12% per annum, compared to personal loans at 12% to 24%. For Example- You take a loan of ₹500,000 over 24 months(2 years). Let’s compare LAMF and Personal loan.
| LAMF | Personal loan | |
| Amount | ₹ 5,00,000 | ₹ 5,00,000 |
| Interest | 10.5% | 16% |
| 2 years | 24 | 24 |
| EMI | ₹ 23,180 | ₹ 24,480.60 |
| Processing Fee | ₹1000 | 2% (₹10,000) |
| Total Cost | ₹5,57,312.54 | ₹ 5,97,534.39 |
| Total Interest | ₹ 57,312.54 | ₹ 97,534.39 |
LAMF saves you ₹40,221.85, reduces the EMI amount, and processing fee is less, just only ₹1000.
2. Continued Investment Growth
You can continue your investment growth without an exit, unlike a redemption, where you permanently quit your position. LAMF provides the opportunity for the investor’s portfolio to profit from the upward trend in the market even if he is borrowing money. If the mutual funds are yielding high returns in the market during the uptrend, LAMF gives you the chance to liquidate your assets without giving up the future profits
3. Tax Efficiency
Suppose you’ve built mutual fund investments worth ₹5,00,000 in a year, but now you need emergency money. If you sell them, you’ll have to pay around 20% short-term capital gains tax. Instead, you can pledge your mutual funds and get a loan against them. This way, you’ll get the money you need, avoid paying tax, and keep your mutual fund investment growing.
4. Speed and Minima Documentation
LAMF leverages digital APIs and automated KYC verification. Data is auto fetched directly from your demand account or mutual fund folio, which is a 100% digital, paperless process. So, money is typically credited to your account within 2-6 hours after verification, or maximum within 2 working days, compared to personal loans that require 1-3 days.
| Aspect | LAMF | Personal Loan |
| Interest Rate | 10.5-12% p.a | 12-24% p.a |
| Collateral | Required (MF) | None(unsecured) |
| Credit Score | Not required | Mandatory |
| Processing Fee | 0.25%-2% | 1-2% of loan amount |
| Approval Time | Few hours to 2 working days | 1-3 days |
| Documentation | Minimal(100% Digital) | Extensive |
| Impact on Credit Score | Can repay anytime, no prepayment penalty | Fixed EMIs, prepayment charges may apply |
| Impact on Credit score | Minimal Impact (secured) | Negative impact |
| Best for | Short-term needs while retaining investment | Emergency funds without collateral |
LTV(Loan to value) Ratios for Different Fund Types
For understanding LTV variations optimize LAMF benefits:
| Fund Type | Portfolio Value | Max LTV% | Maximum Loan | Interest rate |
| Equity Mutual Fund | ₹10,00,000 | 50% | ₹5,00,000 | 10.5-12% |
| Debt Mutual Fund | ₹10,00,000 | 75-80% | ₹8,50,000 | 9-11% |
| Hybrid Fund (50-50) | ₹10,00,000 | 60-65% | ₹6,62,500 | 10-11.5% |
Best LAMF platforms in India
1. HDFC Bank
- Interest Rate: 9% p.a(debt), 10.5% for equity
- LTV(Loan-to-Value): Up to 50% on equity funds and 80% on debt fund
- USP: Digital application, instant overdraft, wide coverage
2. ICICI Bank
- Interest Rate: 11.5%-13.7% p.a
- LTV: Up to 85% for debt funds
- USP: High LTV, digital support, no prepayment charges
3. Volt Money (FinTech)
- Interest Rate: 9-11% p.a
- LTV: Up to 70% (flexible credit line)
- USP: Seamless digital experience
Volt Money is known for providing instant LAMF approvals in as fast as 5 minutes, fully digital with no prepayment fees.
Also read: Private vs Public Sector Banks: Which Banks Are Attracting More Foreign Investors in 2025
4. ICICI Bank
- Interest Rate: 10.75% – 11.75% p.a
- LTV: Up to 50%(equity), 80%
- USP: High LTV, digital support, no prepayment penalty
5. State Bank of India (SBI)
- Interest Rate: Starts from 8.5% p.a (typically 10.1-11.6% for LAMF)
- LTV: Up to 50% (equity/hybrid/ETF), 75% (debt)
- USP: Strong national reach, trusted brand, digital process available.
The supervision of this facility under the LAMF regulation comprises a dual structure, where the lending part is mainly monitored by the Reserve Bank of India (RBI) and the mutual funds’ assets by the Securities and Exchange Board of India (SEBI).
Conclusion
For Indian Investors having large mutual funds portfolios, LAMF is more than just a borrowing option. It is a financial tool that can boost and diversify your investments by giving you both the chance to grow and to access your money at the same time.
Written by Yatheendra N