Loan Against Shares / Mutual Funds
Borrow against your portfolio instead of selling it, and stay invested through the need.
What it is
A loan against securities lets you pledge shares or mutual fund units as collateral and borrow against their value — without selling them, and without triggering capital gains tax.
The lender marks a lien on your holdings and sanctions an overdraft or term loan against a percentage of their value. That percentage — the margin — is typically higher for debt funds and lower for equity, because equity collateral moves more. You keep ownership, and any dividends or growth remain yours.
It works well for genuinely short-term needs: a medical emergency, a business working-capital gap, a shortfall on a property purchase, or an education fee due before a scheduled redemption matures. It works badly as a way to fund consumption or, worse, to buy more securities.
The mechanism that catches people out is the margin call. If the market value of the pledged collateral falls below the required level, the lender can ask you to pledge more or repay part of the loan — and if you cannot, they can sell the collateral. That happens precisely when markets are falling, which is the worst possible time to be a forced seller.
Get started
Check your eligibility
Loans are sanctioned, disbursed and administered by the lending bank or NBFC. Eligibility, interest rate, margin and all terms are entirely at the lender's discretion.
At a glance
The options, side by side
| Collateral / term | Accepted | Typical margin |
|---|---|---|
| Equity shares | Approved list only | Typically around 50% of value |
| Equity mutual funds | Most open-ended schemes | Typically around 50% of value |
| Debt mutual funds | Most open-ended schemes | Typically higher than equity |
| Interest | Charged only on the amount used | Overdraft structures are common |
| Tenure | Usually renewable annually | Set by the lender |
Before you commit
What could go wrong
- A fall in the value of pledged securities can trigger a margin call, and the lender may sell your holdings to recover.
- Interest accrues whether or not the underlying investment grows. Borrowing costs can exceed portfolio returns.
- Pledged units cannot be redeemed, switched or transferred until the lien is released.
- Borrowing to invest amplifies both gains and losses, and is rarely appropriate for a retail investor.
Mutual fund investments are subject to market risks. Read all scheme related documents carefully. Insurance is the subject matter of solicitation. Loan and deposit products are governed by the terms of the respective lender or issuer.
Yes. Ownership stays with you, so growth, dividends and distributions continue to accrue to you. What you lose temporarily is liquidity — the units cannot be redeemed while the lien is in place.
Usually, because the loan is secured against collateral, so interest rates tend to be lower than unsecured borrowing. The trade-off is the margin call risk, which a personal loan does not have.
We introduce you to the lender and help with documentation. We are not the lender, we do not sanction or disburse anything, and we have no say in the interest rate or the outcome of your application.
Ready to put a strategy behind your money?
Sit with us for a free, no-obligation conversation about your goals — at our Indore office, or over a call at a time that suits you.
