Customers can avail the loan against mutual funds in minutes by pledging the units digitally

BFSI Industry Interview
On: Jul 6, 2022 | From: Advisorkhoj Team
BFSI Industry Interview in Advisorkhoj - Customers can avail the loan against mutual funds in minutes by pledging the units digitally

Mr. Ravi Doshi holds a post-graduate degree in finance from K.J Somaiya Institute of Management and has an overall experience of around 27+ years working in the financial industry.

Prior to MAFS, he was associated with Bank of Baroda and has worked with organizations like Reliance Financial, Reliance Securities, ICICI Bank & ICICI Capital.

Ravi is responsible for driving sales, product, and marketing communications among other areas of business. He overlooks the organization’s strategy in digital consumer finance products and is responsible for building the organization’s growth pillars.

Many retail investors are not aware that they can take loans against their mutual fund holdings. Please explain this facility for the benefit of such investors?

Loan Against Mutual Funds is like any other secured loan where customer can pledge their mutual funds as collateral and can avail of the required loan against the same. The loan can be availed against both equity and debt mutual funds. Customers will retain ownership of their mutual funds and all the associated benefits like growth, dividends, compounding, etc.

With Mirae Asset Financial Services, can avail the loan in minutes. Loan is made available in the form of an overdraft facility. Investors are charged interest only on the utilized amount and for the duration it is utilized.

How can taking a loan by pledging mutual fund units be more beneficial for investors than redeeming the units to meet any short-term needs? Please explain?

When investors redeem the long-term, It also affects investor’s long-term financial goals. In volatile markets, investors might endredeem the investments at a lesser. redemptions take more than 2 days to in your bank accountb.

What are the benefits of taking a loan against mutual funds versus taking a personal loan from a bank?

There are some key differences between personal and LAMF and one should select based on which product suits them best.

  • In personal loans you pay fix EMI which is principal + interest month. On the contrary, LAMF you service only the interest amount month whereas you get the flexibility of repaying the principal amount as per your convenience anytime during the loan tenure.

  • Personal loan charges interest on the entire amount as it is credited to the customer’s account. Interest charged LAMF is only the utilized amount and for the number of days it is utilized.

  • Most personal loans in the market have a lock-in period & prepayment/ foreclosure charges. There are no lock-in and no prepayment/ foreclosure charges.

  • Personal loans being unsecured loans have a higher interest rate compared to LAMF which is a secured loan type.

Mirae Asset India is launching an NBFC arm to provide loans against mutual funds and shares. Please describe your offerings for the benefit of investors and their financial advisors?

Mirae Asset Financial Services is the lending arm of Mirae Asset Group in India. We aim to be one of the trusted brands in the lending business. Our first product is Loan Against Mutual Funds & soon we will launch Loan Against Shares.

For investors, it is a good option to raise instant liquidity for any short to medium-term needs like medical emergencies, house renovation or any unplanned expense without redeeming their long-termMF or shares. For advisors, it allows them to long-termProvide their customers with an option for raising instant liquidity. For investors & advisors both, it is beneficial since LAMF can be availed instantly within minutes and the amount is credited to investor’s bank the same day.

Can I get a loan against my mutual fund units or shares if I do not have a credit history? What will be the indicative interest rate (range) on such loans?

Yes, if you don’t have a credit history you can get Loan Against Mutual Funds. However, if your credit score is less than 650 then you cannot avail of the loan.

Most LAMF & LAS offerings have interest rates starting at 10% onwards. We will be introducing LAMF at 9% p.a. and a fixed processing fee of Rs 999 as an introductory offer.

Can I pledge any units of any mutual fund scheme or will you accept only units of Mirae Asset MF scheme as security / collateral?

There is a large list of approved mutual fund against which you can avail of the loan. The list includes mutual fund from all the AMCs including Mirae Asset MF that are serviced by both CAMs & KFintech (Earlier known as KARVY).

How much loan can I get on my equity and debt fund holdings? Do you minimum and maximum limits for loans against mutual funds or shares?

You can avail of loans up to Rs 1 Cr against Equity Mutual Funds and up to Rs 3 Cr against Debt Mutual Funds. The minimum loan limit is Rs 50,000.

The equity market has corrected substantially over the past few months and NAVs of many equity MF schemes are way below their all-time highs. In such a situation, investors may have to incur a big loss if they redeem their MF units or sell their shares to meet any short-term funds requirements. Please explain how loan against shares or mutual funds can help in this situation?

During times of volatility, we do see a drop in the value of investments due to a drop in NAV or share price. If at such times there is a sudden need for funds, investors feel helpless and have to sell their investments at a lower value. With Mirae Asset Financial Services, they can avail the funds on the same day, which is comparatively faster than redemptions which takes more than 2 days, without having to sell investments at a lesser value. long-termcan redeem investments as per their financial

Mutual Fund Investments are subject to market risk, read all scheme related documents carefully