What Is the Maximum Loan You Can Get Against Mutual Funds?
A loan against mutual funds offers a flexible and cost-effective way to raise funds without liquidating your investments. It is a secured borrowing facility where you pledge your mutual fund units as collateral to access a loan. This type of loan has grown in popularity among retail investors and high-net-worth individuals seeking quick liquidity without disrupting long-term financial goals.
In this article, we explore how much loan you can get against mutual funds, the factors that influence the loan amount, and the loan against mutual funds eligibility criteria in 2025.
How a loan against mutual funds works
When you apply for a loan against mutual funds, the lender places a lien on your mutual fund units, which are held in dematerialised form. You remain the legal owner of the units, but you cannot redeem or switch them until the loan is repaid in full. The loan amount is then disbursed based on a percentage of the Net Asset Value (NAV) of the pledged units.
The facility is typically offered by banks and non-banking financial companies (NBFCs), and in some cases, through online brokers partnered with depositories like NSDL and CDSL.
Maximum loan amount you can get
The maximum loan amount you can avail against mutual funds depends on several factors, including:
- Type of mutual fund units pledged
- Loan-to-value (LTV) ratio offered by the lender
- NAV of the mutual fund scheme
- Risk profile of the fund
- Borrower profile and relationship with the lender
Loan-to-value ratio
Lenders generally apply an LTV ratio, which determines the loan amount as a percentage of the market value of the pledged units. The LTV differs for various fund categories:
- Equity mutual funds: LTV ranges from 50 to 60 percent
- Debt mutual funds: LTV can go up to 70 to 80 percent
- Hybrid funds: LTV may fall between 55 and 65 percent depending on equity exposure
For instance, if you hold equity mutual fund units worth ₹5 lakh, and the lender offers an LTV of 50 percent, the maximum loan you can get is ₹2.5 lakh.
Lender limits
While the LTV sets the cap based on fund value, lenders also define minimum and maximum loan amounts:
- Minimum loan amount: Typically ₹25,000 to ₹50,000
- Maximum loan amount: Can go up to ₹5 crore or more for eligible applicants with high-value portfolios
Some private banks and wealth management firms may extend higher limits under special arrangements or for corporate clients.
Eligibility criteria for a loan against mutual funds
Understanding the loan against mutual funds eligibility requirements is crucial before applying. These criteria ensure that the mutual fund units and the borrower meet the lender’s approval standards.
Eligible applicants
- Indian resident individuals
- Hindu Undivided Families (HUFs)
- Proprietorships, partnerships, and private limited companies (for business use cases)
- Investors with mutual fund units in dematerialised format
NRIs are not usually eligible for this facility due to regulatory restrictions, unless permitted under specific NRO account conditions.
Fund eligibility
Not all mutual fund schemes are accepted by lenders. Eligibility depends on:
- Scheme being listed and NAV being regularly disclosed
- Units held in demat form (via NSDL or CDSL)
- The asset management company (AMC) being SEBI-registered
- Scheme liquidity and historical volatility
Closed-ended, thematic, or international funds are generally not accepted as collateral due to higher market and liquidity risk.
Documentation required
Lenders usually ask for the following documents when you apply for a loan against mutual funds:
- Completed application form
- KYC documents (PAN card, Aadhaar, address proof)
- Demat account statement showing mutual fund holdings
- Income proof (may be waived in some cases)
- Bank account details for disbursal and repayment
The process is often seamless and can be completed online if your mutual fund units are held in eligible digital platforms linked to your demat account.
Interest rate and repayment terms
The interest rate for a loan against mutual funds is typically lower than unsecured personal loans, as it is backed by collateral. In 2025, interest rates generally range from:
- 9 percent to 11 percent for equity fund loans
- 8 percent to 10 percent for debt fund loans
Some lenders offer overdraft facilities where you are charged interest only on the amount drawn, not the entire sanctioned limit.
Repayment
Repayment terms may vary, but the typical options include:
- Tenures of up to 12 to 36 months
- Interest-only payments with bullet repayment of principal
- EMI-based repayment (principal plus interest)
- No foreclosure charges in many cases
Failure to repay or maintain required margin levels may result in the lender liquidating the pledged units to recover dues.
Factors that influence the loan amount
While the NAV and LTV play the largest roles in deciding the maximum loan amount, the following also impact the final sanction:
- Fund category: Lower volatility funds (e.g., liquid or short-duration debt funds) allow higher LTVs
- Borrower profile: Existing bank customers with strong credit history may get preferential terms or higher limits
- Market conditions: In times of high volatility, lenders may revise LTVs or limit exposure to equity-heavy portfolios
- Pledge approval time: The speed of lien marking by the depository (NSDL/CDSL) can also affect how soon you can access the funds
Benefits of using this facility
Opting for a loan against mutual funds offers several practical advantages:
- Quick access to liquidity without redeeming investments
- Continued compounding of mutual fund units
- Lower interest cost than credit cards or personal loans
- No need to disturb long-term goals such as retirement or a child’s education
- Minimal documentation and no impact on credit score (unless defaulted)
Limitations and precautions
Before deciding to apply, keep in mind the following risks and limitations:
- NAV fluctuations may result in margin calls or top-up requirements
- Fund units remain locked until full repayment
- Overuse of leverage may disturb your broader asset allocation strategy
- Not all funds or AMCs may be accepted as collateral
You should always ensure that the loan is used for genuine financial needs and not for speculative investing or lifestyle spending.
Conclusion
The maximum loan you can get against mutual funds depends primarily on the type and value of your holdings, the loan-to-value ratio, and the lender’s policies. While the cap may go up to several crores, especially for debt fund portfolios, responsible usage is key.
By understanding the loan against mutual funds eligibility, documentation, and associated risks, you can leverage this facility effectively for short-term financial needs while maintaining your long-term investment goals. With digital platforms simplifying the application and lien-marking process, borrowing against mutual funds is now more accessible, flexible, and investor-friendly than ever before.
Pranab Bhandari is an Editor of the Financial Blog “Financebuzz”. Apart from writing informative financial articles for his blog, he is a regular contributor to many national and international publications namely Tweak Your Biz, Growth Rocks ETC.
