A sudden cash crunch need not always mean selling off investments. If you have mutual funds and want flexibility without compromising your wealth accumulation journey, taking a loan on mutual funds might solve the problem. It is a practical solution that enables staying invested while availing the liquidity required—fast.
The type of loan on mutual funds means there is no need to liquidate them. Instead, the lender has them as collateral while you spend the loan amount for your personal or professional needs. Your investments keep growing in value, and after the loan repayment, the units are freed. It is a win-win, given that it's widely used.
Why Is This Option Gaining Popularity?
Loans against mutual funds are best for fast processing, low interest rates, and the absence of premature closure of long-term investment plans. You are not liquidating your mutual fund so you don't have to pay exit loads and tax complexities. On the other hand, the value of your holdings continues to grow while for now, you use it elsewhere.
Borrowing, like any other form, does require documentation. Preparation of the applicant with the right paperwork could make things smooth and instant, especially with the digital behavior of today's instant cash loan app world.
Here Are the Documents You’ll Need
The list is fairly clear-cut, but accuracy features. Match all of your details against all documents to avoid delays.
- Proof of Identity
Aadhaar card, PAN card, passport, voter ID, or driver's license
- Proof of Address
Aadhaar card, utility bill, passport, rent agreement, or bank statement
- Mutual Fund Statement
A consolidated account statement (CAS) or a recent individual mutual fund holding statement
- Bank Account Details
A canceled cheque or a recent bank passbook copy/bank statement to link for disbursal and EMI payments
- Income Proof (if required)
Salary slips, Form 16, or income tax returns for salaried individuals; bank statements or business proof for self-employed individuals (though many platforms may skip this)
- Loan Agreement and Pledge Request
A digital pledge form and loan agreement are usually filled out online as part of the approval workflow.
Most importantly, many platforms today allow you to complete the process online, with e-KYC and e-signature capabilities. Once your mutual fund units are verified and pledged, the amounts typically get credited within hours.
Ease of Access and Digital Speed
Speed is crucial—especially with an unforeseen medical emergency or expenditure that suddenly cannot be budgeted for through day-to-day living. Today's tech-first platforms have done away with long waits for approvals or physical visits for loan disbursement. Once your mutual fund folio is linked with your PAN and mobile number, instant processing of the request may be done for pledging it. Borrowing has never been as less stressful and more efficient as it is now with the fantastic speed.
Conclusion: Be Document-Ready and Act Quickly
This fast-paced world requires you to be prepared, and ready for anything—a medical bill, school fees, or just a short-term cash crisis. Knowing what documents you will need to secure a loan against a mutual fund is one step ahead of the game. So gather those documents and apply, because financial freedom is just a click away, and it doesn't wait for your time-sensitive needs.
