Finance

Borrowing a Loan Against Mutual Funds at a Lower Rate Made Easy

Considering a loan to finance your requirements is not possible till the time you receive a good interest rate. Many people think that it is difficult to find financing services that have low-interest charges. But, the same can be done with the help of a loan against mutual funds.

However, there is a reason why loan against mutual funds interest rate is lower. It is because borrowers need to hand over their assets as collateral. This makes the financing category a secured one for the agency. In other words, it reduces the risk of losing money from the financing firms’ perspective.

Have you been trying to increase your knowledge about loan against mutual funds? Then, here is a list of five points that you should read. These will highlight how a borrower can acquire better interest rates on such services.

  1. Cross check eligibility

What most of you might not know about is the eligibility factor of a loan against mutual fund. Not every mutual fund is approved by financing institutes for borrowing a loan. Thus, the first thing that you need to do is cross check the eligibility list. The higher your mutual fund eligibility ranking is, the better interest rate you would receive. Overall, it purely depends on the risk level attached to your invested mutual funds. If it is too risky, then there is a chance that you might have to pay high interest

  1. Mutual fund value

Another factor that can allow you to enjoy better interest rate is the value of your mutual fund. If your mutual fund value is greater than the applied loan amount, then the interest rate will also be feasible. It happens because the financing firm treats your application as a low-risk transaction. This also increases your chance of getting a loan against mutual fund easily.

  1. Documentation

A borrower can never get a loan without proper documentation. The same is the case with a loan against the mutual fund. One of the most important documents which a borrower should have is a lien. This document can be obtained by your mutual fund manager in exchange of a request slip. The slip needs to mention that you would like to hand over the rights of your funds to a lender. This way, the creditors will be able to manoeuvre your mutual funds till the time you repay the loan.

  1. Prepayment of loan

One of the simplest ways of saving on mutual fund loan interest rates is by opting for this method. Like any other financing service, you will have to borrow loan against the mutual fund for a particular tenor. For this, you will end up paying the interest rate for every month of the tenor. If you would like to acquire a better deal for your loan, then you can simply prepay when possible. It will cut down the additional amount of interest charged for the leftover tenor.

  1. Shot for better rates

While trying to search for a financing firm that provides a loan against mutual funds, you should also look out for the best interest rate that you receive for such services. In other words, it can also be called shopping for a better interest rate on your loan against the mutual fund. Due to the cut-throat competition, there are chances of finding the lowest possible interest rate offers easily.

  1. CIBIL score and credit history

Even though the said credit scheme is secured in nature, a good CIBIL score along with a good repayment history can increase your chances of getting approved for the best rate schemes. Thus, check your credit history and get all the negative remarks removed before it starts affecting your credit eligibility. Along with that, ensure a credit score of 750 and above. If either of the two factors is not up to the mark, hold your loan application and start improving your credit history. Once everything is in a better state, reapply for a loan against mutual funds.

Leading NBFCs offers you financing services like a loan against shares, personal loans, business loans, and much more. To make the loan process less time-consuming and completely hassle-free, they even have various pre-approved online deals.

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