Mutual Fund Lien: A Detailed Guide 2024
Key Takeaways:
- You can get a loan against mutual fund units by marking a lien.
- A lien is marked by the lender on your mutual fund units, not the amount.
- By getting a loan against your mutual funds, you maintain your investments yet meet short-term financial crunches.
- You can fill out a lien form to secure a lien on your mutual fund units.
When dealing with financial crunches, the first instinct is to liquidate your investments.
And it makes sense because these are the rainy days that you save for in the first place.
But what if we told you that there’s a better alternative?
An option that allows you to continue earning dividends, maintain your mutual fund investments, and secure quick funds.
That’s right! you can get a loan by marking a lien on your mutual fund units.
You may wonder what a lien is.
Here’s everything you need to know about mutual fund lien – from its process to its advantages.
Loan Against Mutual Funds – Easiest Way to Meet Short-Term Capital Shortage
With so many money lending options, loans against mutual funds stand apart as convenient and secure.
The popularity of mutual fund loans continues to grow, creating one historic record after another.
In May, it made a total collection of $701.90 billion, the highest ever, despite experiencing several fluctuations over the years.
This might pique your interest in learning more about mutual fund loans.
The arrangement of mutual fund investments is quite simple:
- You collect money from a pool of investors and invest it into a common interest. It could be an asset, stock, bond, or any share.
- Now each investor receives a dividend or profit from this investment. The value, however, depends on the market conditions.
- Moreover, the amount is equally distributed amongst investors, regardless of capital gain or loss.
Now what gives mutual fund investments an edge is the ability to get a loan against them.
If you’re ever stuck in a cash-strapped situation and you need quick access to funds, you can take a loan against mutual funds without liquidating your investment.
In addition to this, you can continue gaining profit from your investments.
All you have to do is mark a lien on your investments – a way to give security to your lender – and then pledge a loan against them.
The value of your loan will depend on the value of your mutual fund units.
What Exactly Is A Lien?
A lien marked on your mutual fund units is collateral security.
It is given to the lender so that they can recover the money should you fail to repay or meet the terms and conditions.
To put it simply, a lien is marked by the lender on your mutual fund units that serves one purpose: security.
How Does A Lien Work?
To understand how a lien works, you should know the three things a lien form requires:
- Name of Borrower
- Folio Number
- Value of Unit (Against which you seek the loan)
You are the borrower or unitholder, so, you must sign the lien form. This form is compiled with a letter from the lender.
In this form, they will specify the unique arrangement of your loan.
They will clearly mention the bank account details, the repayment method, and the total tenure during which the loan must be repaid with interest.
People get confused about where the lien is marked – it’s not the amount, it’s the units.
Now the value of units fluctuates according to the economic and market conditions.
India has adapted well to the digital shift and offers digital lending options.
Thus, you can now secure a loan and get a lien marked online.
- All you have to do is submit a request against your mutual fund units and the folio number.
- Once the lien is marked, the financier will grant the loan amount.
- The process is simple, fast, and completely secure.
With 50Fin, you can get a loan against mutual funds within 7 minutes and get the amount disbursed within 4 hours!
5 Advantages of Lien Marking
1. Continue Profiting From Returns
Now because you choose not to sell your investments, you continue to earn profits from your mutual fund units.
And the best part is that you meet your short-term and temporary cash requirements.
This way, you beat two birds with one stone.
2. Zero Exit Loads
Since you aren’t redeeming your mutual fund investments or liquidating your investments midway through the investment tenure, you don’t have to pay exit charges.
However, you’re still required to pay while redeeming the mutual funds and also in case of a shortfall.
3. No Taxation
When you sell your mutual fund investment, you are required to pay short-term capital gains tax.
By choosing to get a loan against mutual funds instead of selling your mutual fund units, you also save that money.
4. Quick Access to Funds
This digital lending process and lien marking are fast.
You don’t have to spend hours doing physical paperwork and waiting for loan approval.
In fact, 50Fin helps you secure loans within minutes!
5. Meet Temporary Financial Needs
By keeping your mutual fund investments and instead seeking a loan against them, you get to meet short-term financial needs without disturbing your long-term financial goals.
Why You Should Mark A Mutual Fund Lien To Secure Funds?
No one knows when you could be faced with a difficult financial situation.
But giving up on your investments is not an ideal way to deal with it, especially when you have better alternatives, like taking a loan against your mutual fund units.
Marking a lien on your mutual fund units can help you meet short-term cash shortages without abandoning your long-term financial plans.
This option allows you to continue earning dividends and avoid paying capital gain tax or any exit charges altogether.
Thus, benefit from this money-lending option and get capital disbursed into your bank account within hours!
The Bottom Line
Lien marking is an essential step in securing a loan against mutual funds.
It is essentially a security given to the lender, promising you will meet the loan obligations.
Loans against mutual funds have several advantages.
You meet short-term financial needs without dissolving long-term financial plans by getting a loan against your mutual fund units.
This is where 50Fin comes into play.
We offer loans against mutual funds with interest rates as low as 10.5% per annum.
The process is completely digital and the loan amount is disbursed into your bank account in 4 working hours.
Check your eligibility and borrow a loan against your mutual funds at your convenience.
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