Skip to main content

Loan against Mutual Fund

If markets are in a bull phase, it makes sense to redeem your investments

Say, you have investments in mutual funds (MFs), and you need money urgently. Do you redeem your investments? HDFC Bank Ltd seems to suggest you shouldn't. It launched its digital loans against mutual fund on 23 May. It is an overdraft facility that promises to give you money within minutes. Should you opt for it?

What is it?

At present, it is possible to take loans against mutual fund and equity share holdings. But HDFC Bank's loan against funds is completely online and paperless. You just need an HDFC Bank savings account.

The bank will offer loans against fund houses that Computer Age Management Services Ltd (Cams; one of India's largest registrar and transfer agents) services. So far, it will cater to 10 fund houses (see graph), It said it will eventually offer loans against MF units of other fund houses as well, including those serviced by other R&Ts such as Karvy Computershare.


The process is simple. Log in to your internet banking account, fill in basic details, and choose if you want to hypothecate equity or debt funds. The bank will re-direct your application to Cams, which will verify your MF holdings. As per Reserve Bank of India (RBI) rules, you can avail loans up to 50% of your equity funds and 80% of your debt funds. HDFC Bank offers loans of Rs1-10 lakh on equity funds and up to Rs1 crore on debt funds. It is an overdraft facility, so there is no tenure, but the loan is to be renewed annually.

After you choose the funds and the number of units, your application goes into processing, and you get your money in minutes. As per RBI guidelines, you need to open a separate current account (at HDFC Bank) where the bank will deposit your loan amount.

What works?

The process needs no documentation and is online. Also, you need not have bought funds from HDFC Bank. Units bought from others are also eligible securities here. On the Cams website, you can see all your holdings at one place.

When you take a loan against your MFs, you still own them; you just can't sell them till you repay your loan.

What doesn't?

As of now, this facility is available only on folios with a single holding.  But very soon, other holding pattern folios will also be made available

Loans against securities and funds are expensive. The bank didn't commit on the interest rate, saying it would depend on the customer's relations with the bank, indicated a rate of 10-11.5% per annum. Add a flat processing fee of Rs 1,499 per transaction.

Future Focus take on This

Almost a year ago, NJ India Invest Ltd, one of India's largest MF distributors, also started offering loans against MFs, along with Bajaj Finance Ltd. NJ India Invest holds its investors' MF units in dematerialised form, so a tie-up with a R&T isn't necessary. As an investor, this doesn't matter, but if you aren't an NJ India Invest's customer, then your only choice to take a loan against MFs is HDFC Bank, if you are want an easier way.

The question is: should you take a loan against MFs? The only situation when you can think of taking such a loan is if equity markets drop sharply and you lose, say, 20-25% of your corpus and you need money urgently. Instead of selling your MFs at a loss, you can take a loan and retain your units. When markets recover, your funds will grow back. But if your portfolio is in profit and you need money, it's better to sell your holdings instead of borrowing, he said.

Taking a loan, if required, that is less than 50% of the lien units' value If markets fall, you would not be called upon to repay your loan amount prematurely or offer more units in lien. Keep that margin of safety.

If markets are in a bull phase, it makes sense to redeem your investments. If markets are bearish, it may make sense to borrow if you need money urgently. If you must, then borrow wisely.




SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Popular posts from this blog

Post Office Deposits Interest Rates

Best SIP Funds to Invest Online   SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich For further information on Top SIP Mutual Funds contact  Save Tax Get Rich on 94 8300 8300 OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com

HDFC Capital Protection Oriented Fund – Series II 36M May 2014 NFO

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300     HDFC Capital Protection Oriented Fund – Series II 36M May 2014 NFO will be open for subscription from 16th May 2014 to 30th May 2014. The key features of the scheme are as mentioned below:   Type of Scheme A Close Ended Capital Protection Oriented Income Scheme Benchmark Crisil MIP Blended Index Fund Manager Mr. Anil Bamboli , Mr. Vinay R Kulkarni & Mr. Rakesh Vyas New Fund Offer (NFO) Period 16 th May 2014 to 30 th May 2014. Minimum Application Amount Rs. 5000 and in multiples of Rs.10 thereafter Plans/ Options Offered Growth and Dividend Payout Facility Liquidity To be listed For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

SBI Magnum Taxgain

Grown 37 times in 23 years- SBI Magnum Taxgain Scheme   Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGet Rich on 94 8300 8300 Leave your comment with mail ID and we will answer them OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com OR Call us on 94 8300 8300  

How to PPF Account extension after maturity

A PPF account can be retained after maturity without making any further deposits. The balance will continue to earn interest till it is closed. Public provident fund or PPF remains one of the most popular savings options for the long term despite a gradual decline in interest rates over the years. PPF accounts have a maturity period of 15 years and they can be extended. If there is no fund requirement, financial planners say, PPF account holders should extend the account beyond 15 years. In terms of income tax implications, PPF accounts enjoy the benefit of EEE (exempt-exempt-exempt) status . Under Section 80C, contribution up to Rs 1.5 lakh in a financial year qualifies for income tax deduction. The interest earned and maturity proceeds are also tax free. What are your options when a PPF account matures? 1) A PPF account can be closed after the expiry of 15 financial years from the end of the year in which the account was opened. 2) The subscriber can retain his

Mutual Fund Riskometer

Mutual Fund Riskometer   Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot] Com OR Leave a missed Call on 94 8300 8300 --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual Fund Application Forms from all AMCs Down
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now