Get a loan against your MFs but be wary of the caveats
Systematic investment plans through mutual funds (MFs) are the best way to meet your long-term financial goals. Financial planners or advisers will vouch for that. Yet, not many retail investors stay committed to their long-term plans. Only 54% of retail money remained invested in equity mutual funds for more than two years in 2020, as per data from the Association of Mutual Funds in India. The rest was redeemed for various reasons. Notably, investors do have the option of borrowing money against their MF units. Not many are exercising this option. Thus, a very small fraction of assets under management of the MF industry has been pledged. Firms like Bajaj Finance and Mirae Asset Financial Services, and startups such as VoltMoney are now working to change this scenario.
Customized products
In the current financial landscape, a diverse array of lending options is available to investors, ranging from traditional banks to innovative fintech platforms. The latter includes VoltMoney, DhanLAP, AbhiLoans, Mirae Asset Financial Services, and Bajaj Finserv. All of them have varying loan-to-value ratios. The interest rates too vary, with most banks offering loans at 8-16% (with an average of 11%). VoltMoney, which has a tie-up with Bajaj Finance, lends at 9-11%, while Mirae Asset Financial Services lends at 9%.
As for processing fees, banks impose digital fees of around 0.5-1% and physical fees in the range of ₹2,000-4,000 plus GST (goods and service tax). In contrast, VoltMoney and Mirae Asset Financial Services charge ₹999 plus GST. Payment options range from balloon payments (wherein the entire principal is paid at the end of the loan) to equated monthly instalments, or EMIs (regular payment of principal).
Borrowers enjoy the
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