Synopsis: This article aims to explain differences between loans against mutual funds and Credit Card Loans so that you can decide which one is better for you to take in 2026.
According to an article by economic times 48% of mutual funds investors are in the age bracket of 18-30 years. Redseer Strategy Consultants says digital lending is projected to account for 5% of all retail loans by FY28. Instead of selling investments or using expensive credit cards, people are borrowing against mutual funds and banks are promoting Loan against mutual funds aggressively and lastly instant digital approvals are in trend now. But what do these trends imply? It implies that young investors are now exploring multiple ways to borrow while keeping their portfolios invested.
What is a Loan Against Mutual Funds (LAMF)?
It is a type of loan where you can borrow money from a financial institution or lender by using your mutual funds investment as collateral. Banks and NBFCs generally give loans that’re about 50 to 70 percent of the value of equity mutual funds and they give higher limits for debt funds. The interest rates for these loans are usually lower than the interest rates for credit card loans. Most banks now have Loan Against Mutual Fund facilities, this means that the lien process can be done online and it only takes a few minutes. The loan is secured against the investments so the interest rates are usually between 9 and 13 percent but again this depends on who’s lending the money and what type of fund it is.
How Credit Card Loans Work
Credit card loans are loans that you can get using your existing credit card limit. You do not need to fill out a lot of paperwork to get these loans. Banks usually give you these loans as EMIs, personal loans that are pre-approved (10% to 24% interest rate per annum)or like cash that you can take from your credit card account (30-48% interest rate per annum). You can usually get it quickly but credit card loans can be tricky as one of its cons is that the interest rate is very high (up to 48% every year). If you do not pay back your credit card loan on time you will have to pay money as a penalty, this can increase your debt and hurt your credit score.
LAMF vs Credit Card Loans: Key Differences
Also read: 12 International Mutual Funds Indian Investors Can Still Invest in During 2026
Which Option Could Be Better for Borrowers?
Note: Values are subject to change please refer to official websites before applying.
Conclusion
Loans against mutual funds are a good option because they are usually cheaper than loans from credit cards. This means that people who invest in funds can borrow money without having to sell their investments.Mutual fund loans have some risks because the market can be unpredictable, on the other hand credit card loans can become very expensive very quickly because the interest rates are so high. Loans against funds are still a better choice for many people because they are cheaper than credit card loans.
Written by Shreya Tiwari
