Loans Against Mutual Funds: Investor Guide to Risks, Benefits, and LTV Ratios
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Loan Against Mutual Funds: What Investors Must Know About LTV, Risks, and Costs
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CNBC TV18•21-02-2026, 17:07
Loan Against Mutual Funds: What Investors Must Know About LTV, Risks, and Costs
•Varun Fatehpuria, Founder and CEO of Daulat Finvest, advises using loans against MFs as a short-term liquidity tool, not for return enhancement or lifestyle expenses.
•Investors can pledge mutual fund units to borrow, with the loan amount determined by the Loan-to-Value (LTV) ratio set by RBI guidelines.
•Current LTV ceilings are up to 75% for equity MFs, 85% for debt MFs, and around 65% for direct equities.
•Interest rates on these loans (10-12%) are higher than home loans (7-7.5%), making them suitable for temporary cash needs to avoid capital gains tax.
•Investors face margin call risks if market falls reduce the value of pledged units; it's recommended to borrow below the maximum LTV to mitigate this.
