LAMF can be better than personal loans, if used wisely

Mutual funds are often seen as long-term investments, but they can also serve as collateral for quick loans. A loan against mutual funds (LAMF) lets you borrow while staying invested. Thanks to digital platforms, LAMF is now more accessible for those seeking short-term liquidity without compromising long-term goals. But like any financial product, it comes with risks. Think of it like pledging gold—you retain ownership, but the lender places a lien, so you can’t redeem or switch until the loan is repaid. How much can you borrow? Up to 50 per cent of equity fund value Up to 75–90 per cent for debt/liquid funds Mutual fund units under lock-in periods (such as ELSS fund units less than three years old) are not eligible for pledging. However, hybrid funds are treated differently by lenders—some classify them as equity irrespective of their equity exposure, while others like to treat debt-heavy hybrid funds as debt. Always check with your lender in advance. Why not just take a personal loan instead? Personal loans charge 12–24 per cent

This article was originally published on June 20, 2025.