Need urgent cash but don’t want to break your investment? You can easily get a loan against your mutual fund units in India. It’s quick, requires no physical documents in most cases, and helps you unlock money without selling your SIP or mutual fund investment. Here’s everything you need to know about the process and eligibility in 2026.
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What Is a Loan Against Mutual Fund and How Does It Work?
A loan against mutual fund is a secured loan where your mutual fund units are pledged to the bank or NBFC, and in return, you get a credit line or lump sum amount. You don’t need to sell your mutual funds—they remain invested, and you continue to earn returns while using the loan amount.
It works like an overdraft facility. You can withdraw money up to a certain limit based on the value of your mutual funds. And the best part? Interest is charged only on the used amount, not the whole sanctioned amount.
Why Should You Choose Loan Against Mutual Fund in 2026?
When you’re facing a temporary cash crunch—medical emergency, education fee, travel plans, or even urgent bills—a loan against your mutual funds is faster and cheaper than a personal loan or credit card.
There’s no need for a high CIBIL score. No need to explain why you need the money. No need for a salary slip. Your mutual fund units are your security.
This is perfect for emotionally tough situations where you need money, but also want to protect your long-term investment goals.
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Who Is Eligible for a Loan Against Mutual Fund?
If you are:
- The holder of mutual fund units (either individual or jointly),
- Above 18 years of age,
- Holding units in demat or physical mode, and
- Investing in SEBI-registered mutual funds,
then you’re eligible to apply for a loan against mutual fund in India.
Even students or self-employed individuals can apply, as long as the mutual funds are in their name.
Lenders generally accept both equity and debt mutual fund units. However, loan-to-value (LTV) ratio is higher for debt funds (up to 85%) compared to equity funds (around 50–60%).
What Is the Process to Get Loan Against Mutual Funds in 2026?
Getting a loan against mutual funds is easier than ever in 2026, thanks to digital platforms. Here’s how it works:
First, you apply online through the lender’s website or app (like HDFC Bank, ICICI Bank, Bajaj Finserv, or Zerodha). Then, you authorize them to lien mark your mutual fund units.
Once the lien is registered with the AMC (Asset Management Company), the lender approves the loan—sometimes within minutes.
There is no need to sell your mutual fund units or visit any branch.
You’ll receive a credit limit or lump sum in your account, which you can use any time. If you repay early, there are usually no prepayment penalties.
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How Much Loan Can You Get Against Mutual Fund Units?
The amount depends on the current NAV (Net Asset Value) of your mutual fund units and the type of fund.
- For debt mutual funds, you can get up to 85–90% of the fund value.
- For equity mutual funds, the loan value is usually 50–60% of the fund value.
For example, if your mutual fund units are worth ₹2,00,000, you can get up to ₹1,20,000 (for equity) or ₹1,70,000 (for debt funds).
This makes it an ideal option for those who want to borrow smartly without disturbing long-term wealth creation.
What Is the Interest Rate on Loan Against Mutual Fund?
In 2026, the average interest rate for loans against mutual funds in India ranges from 9% to 12%, depending on the lender and type of fund.
This is much lower than personal loans, which usually charge 13% to 18% interest. And because the loan is secured by your investment, it’s safer for the bank, which helps you get better terms.
Bonus tip: Look for lenders offering overdraft facilities, so you pay interest only on what you use—not the full sanctioned amount.
What Happens to My SIP or Mutual Fund Investment During the Loan?
Your mutual fund investment continues as it is. If you’re running a SIP, it doesn’t stop. Your units remain active and continue to earn returns.
However, you cannot redeem the pledged units unless you repay the loan. Once you repay, the lien is removed, and you regain full control.
So you get the benefit of a loan without pausing your wealth-building journey.
Can I Prepay the Loan Early or Cancel It?
Yes, you can prepay anytime. Most banks and NBFCs don’t charge any penalty for early payment. And once you repay fully, your mutual funds are released instantly from the lien.
This flexibility is what makes this type of loan highly preferred by smart investors and salaried individuals.
It’s practical and emotionally satisfying—you’re solving today’s problems without sacrificing your future.
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Should You Choose Loan Against Mutual Fund Instead of a Personal Loan?
If you have a choice between taking a personal loan or pledging mutual fund units, always choose loan against mutual fund.
It’s cheaper, quicker, and has fewer risks. Plus, you’re not adding a new liability—you’re using your own investment power.
This is especially useful for people who:
- Want to handle short-term needs without disturbing SIPs
- Have invested for long-term goals but need short-term liquidity
- Want lower EMI pressure with more flexibility
Final Words: Use Your Mutual Funds the Smart Way in 2026
Your mutual fund investment is more than just a future plan—it can help in the present too.
With rising financial needs in 2026 and increasing costs of living, a loan against mutual fund offers an emotional and practical solution. It’s the smart way to manage emergencies without breaking your dreams.
Remember, investing is about growing. Borrowing smartly is about balancing today and tomorrow. And a mutual fund loan helps you do both.