By BillCut
Last updated: 1 November 2026
This guide shows how to get loan against mutual funds in six steps. You pick a lender, check that your units qualify, apply, have a lien placed on the units, receive the money, and repay to get the lien removed. The loan amount depends on the value of your units and on limits set by RBI and by the lender.
Which mutual fund units qualify for a loan?
RBI’s 2026 directions for commercial banks say units of a mutual fund scheme count as eligible securities if the scheme is listed, or if units can be repurchased or redeemed through the fund house. The scheme must invest in equity, equity related or debt instruments. ETF units count, but gold, silver and other commodity ETFs are excluded. Read the rules on the RBI credit facilities amendment directions. Each lender may also keep its own list of approved schemes, so check it before you apply.
What are the steps to get a loan against mutual funds?
- Collect your holding details. Download a current statement of your units from your fund house or your account provider. Note the scheme names, folio numbers and number of units.
- Pick a lender and read its scheme list. Ask which of your schemes it accepts, how it values units, and what fees apply. Get the fees in writing.
- Complete KYC and apply. The SEBI FAQs for mutual fund investors say KYC documents must be submitted by a first time investor, so your fund KYC is usually already on record. The lender will run its own checks as well.
- Mark a lien on the units. The lender will explain how it places the lien on your units and which form or online consent is needed. The method differs by lender and fund house, so follow the lender’s instructions and keep the confirmation.
- Accept the sanction and receive funds. Check the loan amount, rate, tenure, repayment method and what happens if the value of your units falls.
- Repay and release the lien. Ask for written confirmation that the lien is removed once the loan is closed.
How much can you borrow against mutual funds?
RBI sets ceilings on loan to value, which is the loan divided by the value of the units. For individuals, the ceiling for banks is 75 percent for non debt mutual fund units and ETF units, and 85 percent for debt mutual fund units. The same page says units are valued at the lower of the average daily NAV of the last six months or the previous trading day’s NAV. Most eligible securities also fall under a limit of 1 crore rupees per individual across the banking system. RBI’s separate directions for small finance banks carry the same 75 and 85 percent ceilings. A lender can offer less than these ceilings.
Illustrative example, not a BillCut offer. Say your equity fund units are valued by the lender at 5,00,000 rupees.
| Item | Illustrative figure |
|---|---|
| Valued units | 5,00,000 rupees |
| Ceiling at 75 percent | 3,75,000 rupees |
| Loan you decide to take | 2,50,000 rupees |
| LTV at that loan | 50 percent |
Taking less than the ceiling leaves room if NAV falls. Remember that valuation can use the lower of two NAV measures, so your lender’s figure may be below today’s market value.
What documents do lenders usually ask for?
Requirements differ, so confirm with your lender. Expect identity and address proof, PAN, bank details, and a statement of the units you want to pledge. Some lenders ask for income proof too. Do not pay anyone to speed up approval, and keep every consent you give in writing.
How does repayment work, and what should you check first?
Repayment terms vary by lender. Ask whether you pay interest only, EMIs or a bullet amount, and whether part payment and early closure are allowed. Ask what happens to units under lien: whether dividends, switches or redemptions are blocked. SEBI’s FAQ says redemption proceeds are generally paid within three working days, so plan cash needs ahead. For more on early closure, read prepayment pros, cons and charges.
A loan against units makes sense only after you weigh the risk to your investments. If your real aim is to clear costly card or personal loan dues, you can Check your options with BillCut as one of several routes to compare. To see the market risk side, read how to start investing in mutual funds, and for a wider view see secured vs unsecured loans in India.
How BillCut can help
BillCut is a balance transfer and debt reduction platform. It works with lending partners to help eligible borrowers move high interest dues, such as credit card balances and personal loan EMIs, into one structured EMI. BillCut earns from helping borrowers refinance, so it has an interest in this option. Approval and terms depend on the partner lender. BillCut does not offer loans against mutual funds.
Frequently asked questions
Can I get a loan against any mutual fund?
No. RBI’s directions for banks cover listed schemes or schemes with a repurchase facility that invest in equity or debt, and exclude commodity ETFs. Your lender may accept fewer schemes.
Do I have to sell my units to get the loan?
No. Units stay in your name but are held under lien for the lender until the loan is repaid.
What is lien marking?
It is the step where your units are flagged as held for the lender, so they cannot be redeemed freely while the loan is open. The lender will explain its method.
How fast will I get the money?
That depends on the lender, its checks and how quickly the lien is confirmed. Ask for a timeline in writing.
Is the interest on the loan fixed by RBI?
The pages I read set loan to value and valuation rules, not the interest rate. Each lender sets its own rate and fees, so compare them in writing.
What if my units fall in value after I borrow?
RBI says a breach of the loan to value limit must be fixed promptly, and in no case later than seven working days.
Where can I complain about a lender?
Write to the lender first. If there is no reply in 30 days, or you are unhappy with it, you can approach the RBI ombudsman.
Disclaimer: This post is general information. It is not investment, tax or legal advice and does not suggest that you borrow, buy, sell or hold any fund. Mutual fund investments are subject to market risks. Read scheme documents and your loan agreement carefully, and speak to a qualified adviser before you decide. Rules cited apply as published by RBI and SEBI on the pages linked, and may change.
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