> ## Content Index > Fetch the complete content index at: https://bayfol.io/llms.txt > Use this file to discover other available public pages before exploring further. # Loan against mutual funds: borrow, don't sell - URL: https://bayfol.io/loan-against-mutual-funds/ - Published: 2026-11-12T12:58:32.000Z - Updated: 2026-11-12T13:28:21.000Z - Description: Need cash? You can borrow against your mutual funds and keep them. - Author: BayFolio LLP You need cash, and your money is in mutual funds. The first thought is to sell. Often there is a second way: borrow against your funds and keep them. This is called a loan against mutual funds, or LAMF. It suits a short need that you can repay. It is still a loan, so read the risks before you choose. ![Sell your mutual funds or borrow against them](https://bayfol.io/content/images/2026/11/bayfolio-lamf-01-sell-or-borrow.png) Prefer to watch? Here is our one-minute video: [Borrow against your funds. Don't break them.](https://go.bayfol.io/loan-against-mf?ref=bayfol.io) ## What is a loan against mutual funds (LAMF)? You offer your fund units to a lender as security. The lender gives you a loan against them. You do not sell anything. The units stay in your name and stay invested. Their value still moves with the market, up or down. You cannot sell them until you clear the loan. ## How does a loan against mutual funds work? 1. **You pledge your units.** This is done online, with a one-time password from the registrar that keeps your fund records. 2. **The lender locks them.** The lock is called a lien. It stops a sale while the loan is open. 3. **The money reaches your bank.** 4. **You repay the loan** when your own money comes in. 5. **The lock is removed.** Your units are free again. The first time, you also prove who you are, link your bank account and approve an auto-debit for the interest. ![How a loan against mutual funds works, in five steps](https://bayfol.io/content/images/2026/11/bayfolio-lamf-02-how-it-works.png) ## How fast do you get the money? The same day, often in a few hours. It depends on the lender and the time of day. A sale takes a few working days to reach your bank. ## How much can you borrow against mutual funds? A share of what your funds are worth, not the full value. In our notes the limit is about 45% for equity funds and about 75% for debt funds (not re-confirmed as on 12 Nov 2026). Each lender sets its own limit. The rest is a safety gap for the lender, in case the market falls. ![How much you can borrow against equity funds and debt funds](https://bayfol.io/content/images/2026/11/bayfolio-lamf-03-how-much-you-can-borrow.png) ## What does a loan against mutual funds cost? You pay interest on the amount you take, for the days you keep it. Each month you pay only the interest. You repay the loan amount later, in one go or in parts. Most lenders also charge a one-time fee. Ask us for today's rate. ## Is there tax when you borrow against mutual funds? A pledge is not a sale. So no capital gain is booked when you borrow. The tax is delayed, not removed. It comes due when you sell the units later. If the lender sells your units to recover the loan, that is a sale too. ## Should you borrow or sell? **Borrow when the need is short and you know how you will repay.** A bonus that is due, a property sale in progress, a payment you are waiting for. **Sell when the money will be spent and not come back.** A loan with no way to repay only adds interest to the problem. Selling is also right when the goal you invested for has arrived. If you need only a part, sell only a part. ## What are the risks? **It is debt.** The interest runs until you repay. **Locked units cannot move.** You cannot sell them, switch them or transfer them to another fund until the loan is cleared. A planned transfer out of that fund will fail. **The margin call is the main risk.** If the market falls, the lender can ask you to repay a part of the loan or to pledge more units, sometimes within days. Your loan limit is a share of what your funds are worth. When the market falls, your funds are worth less, so the limit falls too. Your loan does not fall. If the loan is now more than the limit, the lender asks you to close the gap. That request is a margin call. An example, with a 45% limit: - Your funds are worth ₹10 lakh. You borrow ₹4.5 lakh, the full limit. - The market falls 20%. Your funds are now worth ₹8 lakh. The limit is now ₹3.6 lakh. - Your loan is ₹90,000 over the limit. You must then repay ₹90,000 or pledge more units. If you do not, the lender can sell your units to recover the money. That sale happens after a fall, at a low price, and it brings the tax you wanted to delay. So a margin call comes at the worst time: the market is down, and you may have no spare cash. **How to lower this risk:** borrow less than the limit. In the example, a loan of ₹3 lakh stays inside the new limit of ₹3.6 lakh. No call comes. ![What a margin call is, with an example](https://bayfol.io/content/images/2026/11/bayfolio-lamf-05-margin-call.png) The example is for illustration. Each lender has its own limit and its own rule. ## Who can get a loan against mutual funds? Many online lenders take resident Indians only. You also need your PAN, your Aadhaar, a mobile number, an email and a bank account. The lender must be able to see your funds at the registrar. If you are an NRI, we cannot confirm yet that you can get this loan. Ask us first, and we will check for your case. ![Who can get a loan against mutual funds](https://bayfol.io/content/images/2026/11/bayfolio-lamf-04-who-can-get-it.png) ## How do you start with us? Tell us how much you need and by when. We check which of your funds can be pledged and send you the link. We stay with you until the money is in your bank. We use a service called Volt. The lender is DSP Finance, an NBFC (a lending company). The lender pays us 0.5% a year on your loan amount. We get it as a credit on our software bill, not as cash. You should hear that from us. ## Questions people ask #### Does BayFolio lend the money? No. The loan agreement is between you and the lender. #### Do I have to visit a branch? No, if the fund account is in your name alone. A joint account needs one signed and scanned confirmation. #### Can I repay early? Yes, at any time. The lender we use does not charge for it. #### Is there an exit load? No. An exit load is a fee on a sale, and nothing is sold. --- This article is for education. It is not tax or investment advice, and it is not an offer of credit. Check the lender's terms before you borrow. Mutual fund investments are subject to market risks. Read all scheme-related documents carefully.