One of the country’s foremost private banks and also one of the most trusted lenders – HDFC Bank, lately launched its facility of digital loans against mutual funds (LAMF), in alliance with mutual fund transfer agent CAMS. It’s one of the moves that will enable its customers with mutual fund investments to avail instant credit at any given point. Customers will be able to benefit out of their mutual funds portfolio to avail funds during any emergencies without the need of liquidating their funds or put a halt on their regular investments.
HDFC has tied up with 10 different insurance companies against whose policies loans will be provided. While the provision of loan against Mutual Funds is already available, the HDFC-CAMS overdraft facility is completely online.
This facility can be reviewed through bank’s net banking portal, and similarly, the entire process can also be completed online without the need of any documentation. The customers who hold schemes in at least one of the 10 fund houses registered with CAMS are eligible to apply for this loan. These 10 fund houses collaboratively constitute of about 60 percent of the total assets under management of the industry.
The ticket size of the loan will range from Rs. 1 lakh to a maximum of Rs. 1 crore at an interest rate of 10.5 to 11%. With the digital facility in place, customers can modify their own loan against mutual fund, opting for assets from their portfolio of their choice to be pledged, calculate their overdraft limit eligibility against MF, open an online current account instantly and get the money in the account, everything in a couple of minutes. Customers need to note that this is an overdraft facility; the amount to be borrowed can be reduced if the value of your mutual fund investment falls in the declining market. Customers need to take a call on whether they want to sell of their mutual fund holdings or would borrow a loan against it.
What are the key benefits of HDFC’s Digital Loan against Mutual Fund facility?
- Instant provision of funds
- Accessible all across the country through HDFC’s website
- Interest applicable only the amount utilized
- Customers need not liquidate their mutual funds portfolio
- Option of taking new loans or enhancements can be done online
This loan provision is available on both debt and equity mutual fund units. In the case of equity funds, the customers need to consider the level of the markets, if the market is low, selling could cause a loss. This type of loan is certainly suitable for customers having no credit history.
With a partnership like this, HDFC Bank has made it simpler to pledge on mutual fund units with the loan being approved through an overdraft into a current account which is automatically generated.