This type of loan is widely used by professional investors, traders, and business owners to maintain liquidity while preserving long-term investment compounding.

In this comprehensive guide, we cover:

• How a loan against mutual funds works (step-by-step process)

• Loan-to-Value (LTV) explained with examples

• Collateral, lien creation, and registrar role (CAMS, KFintech, NSDL, CDSL)

• Margin calls, collateral monitoring, and liquidation risk

• Detailed review of VoltMoney, Zerodha Capital, Groww, AbhiLoans, Yenmo, Mirae, and Dhan

• Comparison vs home loan, loan against property, and Margin Trading Facility (MTF)

• Which loan type is cheapest and safest

Interest Rate Comparison: All Major Loan Types in India

Understanding loan costs across categories helps determine when LAMF makes sense.

Key takeaway:

• Home loans are cheapest overall

• Loan against mutual funds is the cheapest liquidity loan

• Personal and credit card loans are most expensive

What is a Loan Against Mutual Funds?

A loan against mutual funds is a secured loan where your mutual fund units are pledged as collateral in exchange for a credit line or loan.

You still retain ownership of mutual funds. They continue generating returns.

Example:

• Mutual fund portfolio value: ₹10 lakh

• Allowed LTV: 60%

• Loan eligibility: ₹6 lakh

You pledge mutual funds and receive a ₹6 lakh credit line.

Understanding Loan-to-Value (LTV)

Loan-to-Value determines maximum borrowing allowed.

Formula:

LTV = Loan Amount ÷ Mutual Fund Value

Example:

Loan = ₹6 lakh
Collateral value = ₹10 lakh

LTV = 60%

Higher LTV means higher risk of margin calls.

Typical LTV by Mutual Fund Type

Debt funds have higher LTV because of lower volatility.

Equity funds have lower LTV due to market risk.

How Collateral Pledge Works (CAMS, KFintech, NSDL, CDSL)

Four entities are involved:

1. Investor

2. Platform (VoltMoney, Zerodha, Groww, etc.)

3. Lender (Bank or NBFC)

4. Registrar or Depository

Registrars manage ownership records.

Key registrars:

• CAMS (Computer Age Management Services)

• KFintech

• NSDL and CDSL (for demat mutual funds)

Step-by-Step Process: Loan Against Mutual Funds

Step 1: Fetch mutual fund holdings

Investor logs in using PAN and OTP.

The platform retrieves holdings from the registrar.

Time required: instant.

Step 2: Loan eligibility calculation

Loan limit calculated using LTV.

Example:

Portfolio value: ₹10 lakh
Eligible loan: ₹6 lakh

Step 3: Loan approval

Lender performs:

• KYC verification

• Risk assessment

• Collateral validation

Approval time:

• Fintech platforms: 5 minutes to few hours

• Banks: 1–2 days

Step 4: Lien creation (pledge)

A lien is created electronically.

The investor still owns mutual funds.

But mutual funds cannot be sold until the loan is repaid.

Step 5: Credit line activation

The loan becomes available as an overdraft credit line.

Step 6: Withdraw funds

The investor withdraws any amount within the limit.

Interest is charged only on the used amount.

Overdraft Structure: Major Advantage

Example:

Approved limit: ₹6 lakh
Withdrawn amount: ₹2 lakh

Interest charged only on ₹2 lakh.

This makes borrowing cost-efficient.

Margin Call Risk Explained

Collateral value fluctuates with the market.

Example:

Initial collateral: ₹10 lakh
Loan: ₹6 lakh
LTV: 60%

Market falls:

Collateral: ₹7 lakh
New LTV: 86%

Margin call triggered.

Investor must:

• Repay part of the loan
  OR

• Add more collateral

Liquidation Risk

If the margin call is ignored, the lender may liquidate mutual funds.

To reduce risk:

Use a conservative LTV of 40–50%.

Loan Against Mutual Funds vs Margin Trading Facility (MTF)

MTF allows borrowing to buy stocks.

Example:

Capital: ₹5 lakh
Borrowed: ₹5 lakh
Total exposure: ₹10 lakh

If the stock falls 30%:

Value: ₹7 lakh
Loan: ₹5 lakh
Loss: ₹3 lakh (60%)

Leverage amplifies losses.

LAMF is safer because it is used for liquidity, not leverage.

Best Loan Against Mutual Funds Platforms in India (Detailed Review)

VoltMoney — Best Overall Platform

VoltMoney is India’s leading LAMF fintech infrastructure platform. In-depth article on Voltmoney

Lending partners

VoltMoney connects borrowers with banks and NBFCs such as Tata Capital.

Interest rate

9%–11% typical range.

Structure

Overdraft credit line.

Interest is charged only on the used amount.

Platform infrastructure

Supports 8000+ mutual funds across CAMS and KFintech.

Advantages

• Fastest approval (minutes)

• Lowest rates

• No prepayment penalty

• Fully digital

Best for

Most investors.

Voltmoney Best Rates

If you are looking to become a loan distributor, you can register below

Become Voltmoney distributor

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2. Zerodha Capital — Best for Traders

Zerodha Capital provides loans against mutual funds and stocks through Incred Finance.

Interest rate

10%–11% typical range.

Maximum loan

Up to ₹10 crore.

Process

• Select securities

• Digitally pledge

• Approval within 24 hours

• Cash credited to the bank account

LTV

Typically around 45–60%, depending on fund type.

Advantages

• Best for Zerodha users

• Supports stocks and mutual funds

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3. Groww Credit — Best for Groww Users

Groww Credit provides an integrated LAMF facility.

Maximum credit line

Up to ₹15 crore depending on portfolio.

Advantages

• Seamless Groww integration

• Continue earning mutual fund returns

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4. AbhiLoans — Lowest Interest NBFC

Interest rates start from ~11%.

Direct NBFC lender KNAB Finance

Advantages:

• Direct lending infrastructure

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5. Yenmo — Flexible Platform

Interest rate around 10.49%. Partner is Bajaj Finance

Advantages:

• Flexible repayment

• No penalties

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6. Mirae Asset Financial Services

Interest rate around 10.25%.

Features:

• Digital approval

• Reliable NBFC

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7. Dhan (DhanLAP)

Interest rate starting from ~10%.

Fully digital application process.

Multiple lending NBFCs onboarded, such as Bajaj, Sriram Credit

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Platform Comparison Summary

Voltmoney Best Rates

Platform	Interest	Best For
VoltMoney	9–11%	Best overall (Speed+competitive Rate)
Zerodha Capital	10–11%	Traders
Groww Credit	10–12%	Groww users
AbhiLoans	11-12%	Multiple Partners
Yenmo	10–12%	Flexible repayment
Mirae Asset	~10.25%	Trusted NBFC, Best for MTF
Dhan	~10%	Dhan users

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Loan Against Mutual Funds vs Home Loan

Home loan is the cheapest overall.

But LAMF is better for liquidity.

Example: Real Cost Comparison

Borrow ₹10 lakh for 1 year.

LAMF saves high cost vs unsecured loans.

Professional Investor Strategy

Professional investors use LAMF to:

• Avoid selling investments

• Maintain compounding

• Access liquidity efficiently

Safe LTV used: 40%–50%

This reduces margin call risk.

Final Ranking: Cheapest Loan Types in India

From cheapest to most expensive:

1. Home loan

2. Loan against mutual funds

3. Loan against property

4. Loan against shares

5. Margin Trading Facility

6. Personal loan

7. Credit card loan

Final Verdict

Loan against mutual funds is one of the best liquidity tools available for Indian investors.

It offers:

• Low interest rates

• Fast approval

• Flexible overdraft structure

• Lower risk compared to MTF

• No need to sell investments

Platforms like VoltMoney and Zerodha Capital make the process fast, efficient, and investor-friendly.

For investors needing liquidity while preserving investments, this is one of the most efficient financing options available today.