About LAMF 
 

What is LAMF?

A loan against mutual funds (LAMF) allows an investor to pledge their mutual fund units as collateral and obtain a loan without having to liquidate the investments. This form of investment backed loans in India enables clients to meet short-term funding needs while their investments continue to remain invested in the market.

Why LAMF Matters in Advisory Portfolios

LAMF provides a structured way to unlock liquidity against mutual funds India from existing investments.

It enables:

● Liquidity without selling investments

● Continued growth of the underlying portfolio

● Lower interest rates compared to most unsecured loans

When LAMF Can Be Used

Distributors can position loan against mutual funds in situations such as:

● Instant emergency funding (instant loan against investments)

● Temporary business cash requirements

● Repayment of high-interest loans or credit cards

● Pre-approved credit lines for future needs

● Avoiding capital gains tax by not redeeming mutual funds

Eligibility Framework

LAMF eligibility for a mutual fund loan India is determined based on:

● Age: Borrower should be between 21 and 60 years (for digital applications)

● Eligible Funds: Equity, hybrid, liquid and debt mutual funds

● Scheme Coverage: 7,000+ mutual fund schemes are eligible

● Loan-to-Value (LTV): Typically 50%–75% of the value of pledged mutual fund units

● Minimum Loan: ₹25,000

● Requires approx. ₹50,000 in equity funds

● Or ₹35,000 in debt funds

How LAMF Works

Mutual fund units are pledged through a pledge mutual funds loan, and a percentage of their market value is offered as a loan.

Key mechanics:

● Loan amount is usually 50%–90% of the portfolio value

● Interest is paid monthly

● Principal can be repaid anytime

● Mutual fund units remain pledged during the loan tenure

● In case of default, the lender has the right to liquidate the pledged funds

This structure allows investors to get loan on mutual fund units without disturbing long-term investments.

Loan & Repayment Structure

LAMF offers a secured loan against investments with:

● Lower interest rates than personal loans or credit cards

● Flexible repayment — only interest payable monthly

● Principal repayment at any time during the 3-year tenure

This can also function like an overdraft against mutual funds, depending on the structure.

Three-Step Process

Step 1 – Check Eligibility

Clients log in using PAN and mobile number linked to mutual fund investments and get their eligible loan amount instantly — simplifying how to take loan on mutual funds.

Step 2 – Activate Credit Line

Mutual funds are pledged and a free credit line is activated. No interest is charged until funds are withdrawn — similar to an online loan against mutual funds setup.

Step 3 – Use the Loan

Funds can be withdrawn as needed. Interest is charged only on the amount used. Principal can be repaid anytime during the tenure.

This enables a quick loan against portfolio without liquidation.

Key Considerations

Distributors should ensure clients understand:

● Market volatility can impact NAV and available loan amount

● Non-payment of interest can lead to penalties or liquidation

● In case of loan default, the lender can sell pledged funds

● Borrowing itself is not taxable, but selling mutual funds to repay can trigger capital gains tax

● Loan tenure impacts overall interest cost

Why Distributors Use LAMF

LAMF enables advisors to:

● Improve client financial flexibility

● Prevent unplanned redemptions

● Preserve long-term wealth plans

● Offer low-cost liquidity options through mutual fund pledge loan India

Enable LAMF Through Centricity

Centricity allows distributors to facilitate loan against mutual funds by providing:

● Eligibility assessment

● Credit line activation

● Portfolio-aligned liquidity solutions