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Having a long-term investment horizon is instrumental for wealth creation. However, investors at times make premature redemptions to address their short-term needs. In this context, Cafemutual held a webinar and hosted Deepit Singh, Founder, Abhiloans.
Deepit believes that loans against mutual funds can help investors address their interim needs without withdrawing from mutual funds.
Deepit explained loans against mutual funds as a product offering of Abhiloans and also highlighted the business opportunities for MFDs in this space.
Why do loans against mutual funds make sense?
Loans against mutual funds give financial cover to investors during their time of need and prevent them from making early redemptions. As investors continue to stay invested, their wealth creation journey continues; keeping their AUM intact.
What are the eligibility criteria for availing loans against mutual funds?
Resident Indians can avail of loans against mutual funds ranging from Rs. 15,000 to Rs. 1 crore. Notably, no credit score check takes place here and investors can get loans against units of any fund house with any RTA.
However, investors can avail 65% of the market value of their equity and hybrid holdings and 75% of their debt holdings. ELSS is not eligible for loans against mutual funds by law.
Remember, if the market value of units pledged increases, investors can subsequently get additional credit facility subject to the above limits. Likewise, in the case of a decline in the market value, investors should either repay a portion of their loan or pledge additional units to meet the applicable requirements.
How can loans against mutual funds support your clients?
Broadly speaking, there are two product categories - EMI (for a tenor of 1 to 3 years) and overdraft facility.
Under EMI, investors pay flat 8% interest and in an overdraft facility, they pay interest at 16% only on the amount of funds that they utilise. To clarify, the unutilised limit amount does not attract any interest charges.
Also, since there is no credit score check, investors finding it difficult to get personal loans otherwise can opt for loans against mutual funds at comparatively reasonable rates.
What benefits do loans against mutual funds have for you?
Of the total processing fees of 2% of the total loan amount, Abhiloans receives 2%, 50% i.e. 1% is passed on to you at the time of disbursement.
For more details on loans against mutual funds and to know how you can partner with Abhiloans, visit https://abhiloans.com/partners.
Disclaimer: The webinar and the story are simply a part of an educational initiative of Cafemutual. You are advised to carry out proper checks and due diligence before making any business decisions.
