The process is straightforward: you pledge your mutual fund units to the lending institution, and based on their value, you can secure a loan. The amount sanctioned generally depends on the type of mutual fund and the current Net Asset Value (NAV). This loan is usually offered as an overdraft facility, meaning you pay interest only on the amount you withdraw. It provides flexibility and helps you manage cash flow in a way that is both convenient and cost-effective.

For individuals in India, loans against mutual funds are often used for purposes like meeting personal expenses, managing business requirements, handling medical needs, or even funding education. Unlike traditional loans, there is no restriction on end-use, which makes it versatile. Since the units remain invested, you do not lose out on potential growth, and once the loan is repaid, the lien on your funds is released. This dual benefit of retaining your investment and accessing liquidity makes it a preferred choice for many investors.

Additionally, loans against mutual funds generally come with lower interest rates compared to unsecured loans, as they are backed by your holdings. The documentation is minimal, and with digital platforms, the entire process can be completed quickly. This makes it an ideal solution for those who want hassle-free access to funds without disturbing long-term goals. With growing awareness and adoption in India, more people are turning towards this smart borrowing option to meet their immediate financial needs while staying invested.