Loan agianst mutual funds: If you are a mutual fund/SIP investor, and need a loan, your mutual fund can help you get one. Is that possible? Yes, instead of selling your mutual funds, you can get a loan against mutual fund units from SBI.
SBI provides leave against mutual fund units for various equity, hybrid and ETF schemes.
But before getting into details, let’s understand what a loan against mutual fund is.
A loan against a mutual fund is a type of borrowing that allows individuals to avail themselves of a loan from a lender by pledging their mutual fund units as collateral.
Read More: Mutual Fund KYC: Here’s how to verify your status online and fix gaps
Loan Against Mutual Fund Units: Benefits
One significant advantage of obtaining a loan against mutual funds is the provision of lower interest rates compared to credit card loans or personal loans. This is attributed to the secure nature of loans against mutual funds, which are backed by collateral.
For example, the interest rates on loans against mutual funds typically range from 8-10%. However, these rates may vary depending on the bank and the specific mutual fund schemes chosen. Generally, interest rates are lower when pledging units of debt fund schemes and higher when pledging units of equity fund schemes.
Read More: SBI Senior Citizen FDs: What Rs 2 lakh investment in 1-year, 3-year, and 5-year FDs will give you
SBI Loan against mutual funds: Features
With SBI, you can get a minimum loan amount of Rs 25,000.
Maximum Loan:
– (a) Equity/ Hybrid/ ETF MF: Rs 20,00,000
– (b) Debt/ FMP MF: Rs 5,00,00,000
Margin: Margin requirements for loans against mutual funds vary based on the type of mutual fund units pledged. For Equity, Hybrid, and ETF Mutual Funds, a margin of 50% is required.
Meanwhile, for Debt and FMP Mutual Funds, the margin is set at 25%.
Approved Schemes: SBI approves multiple mutual fund schemes for offering loan against mutual funds, it includes equity, hybrid, and ETF schemes.
Read More: NPS vs PPF: Which One Is Better For Securing Your Financial Future?
Interest Rates: The interest rates as per SBI’s website are given below:
Loan against Shares, Mutual Funds & Dual Advantage Fund:
– 1-year MCLR: 8.65%
– Spread over 1-year MCLR: 2.50%
– Effective Interest Rate: 11.15%
Processing Fees: Processing fees amount to 0.50% of the loan amount, plus applicable Service Tax (ST), with a minimum charge of Rs 1000 and a maximum of Rs 10,000, including applicable ST.
Review/Renewal Charges (Yearly): Review/renewal charges are set at Rs 1000, along with applicable Service Tax (ST), on a yearly basis.
Eligibility: Individuals over 18 are eligible to apply. Eligible branches include all branches of the institution.
How to apply: To apply for loan against mutual funds with SBI, you need to visit the SBI website and download their application form.
