When there is urgent need of money for short tenures such as three months to a year, one option is to borrow against your mutual fund units. It is similar to an overdraft facility on a bank account, and the advantage is that you do not have to prematurely redeem your units, nor does your SIP get affected.
ET explains the process and the type of funds that can be offered as collateral.
How can you get a loan against your mutual fund units? What would it cost?
Loan against your equity or hybrid mutual fund units could be taken from a bank or a non-banking finance company (NBFC) by pledging your mutual fund units.
You can pay back the loan at the interest rate agreed with the financier. Depending on the quantum of loan you take and the tenure, the interest rate could be in the range of 10-11 per cent on these mutual fund units.
