Loan Against Mutual Funds for Indian Armed Forces Personnel

A perfect overdraft facility that is accessible quickly and comes without disturbing your long-term investments is a possibility – Yes, you can now take a Loan Against Mutual Funds (LAMF) at very competitive terms and we are happy to facilitate the same for you.

Whether you are looking to fund 

• A house renovation, 
• Cover a temporary cash crunch, 
• Planning for children’s education, 
• Invest in property or
• Need some temporary liquidity 

All of the above and even more reasons that don’t need you to dip into your long-term investments especially if they are performing well. LAMF serves as a bridge loan with significant flexibility that you can claim without redeeming your mutual fund investments.

What is Loan Against Mutual Funds (LAMF)?

A Loan Against Mutual Funds is a type of secured loan where your mutual fund units act as collateral. The lender gives you a loan up to a certain percentage, the LTV – Last Traded Value – of your mutual fund holdings.

Unlike traditional loans, you don’t need to liquidate your investments. The funds continue to stay invested and keep growing as per market appreciation while the extra money helps you in managing your cash flow.

What makes it so practical? 

You get access to funds without liquidating your mutual fund portfolio. That means your long-term goals stay intact, and you still get the liquidity you need. Plus, the amount that you get from this facility could be as high as up to 75-80% of your fund’s current value.

What’s more? 

These loans against mutual funds are completely digital in processing. No paperwork hassles, no branch visits. A few clicks and uploads, and you’re done. In fact, it let you set your own drawdown limit, monitor outstanding amounts in real-time, and repay flexibly—just like using an overdraft facility. You repay as per your comfort, opt for interest-only EMIs, bullet repayments, or flexi-EMIs depending on your cash flow.

The best part? These loans don’t feel like loans at all. They are very flexible – you can pay a higher EMI when you want, you could fully prepay when you want after a small initial period, and you can part-prepay if you get some extra cash along the way. It’s like borrowing from your future self but with zero guilt and zero stress.

So, the next time a short-term need arises, before you break your FD or redeem your SIPs, explore Loan Against Mutual Funds. 

It’s efficient, cost-effective, and now tailored for Armed Forces officers with benefits they truly deserve.

Example

A 36-year-old officer posted in Ambala, had a financial goal – he wanted to fund a portion of his new house’s interiors without disturbing his ongoing SIPs and long-term equity funds.

Instead of taking a personal loan, he opted for Loan Against Mutual Funds (LAMF) pledging ₹12 lakh worth of debt mutual funds and got ₹8.4 lakh as loan (70% LTV) within 24 hours, all processed digitally through his mobile. He repaid the loan in 6 months while his mutual funds remained intact, continuing to grow during that period.

Key Takeaways:

• LAMF ensures liquidity without redemption
• Digital, quick processing suits time-bound goals
• No impact on long-term compounding
• Ideal for financially disciplined individuals.

Key Features of Loans Against Mutual Funds (LAMF) for Armed Forces Officers

These loans are now specially designed keeping in mind the unique profile of personnel:

✅ Loan-To-Value (LTV):

• Equity mutual funds: Up to 45-50% of the current NAV available as LAMF
• Debt mutual funds: Up to 70-80% of the NAV available as LAMF

✅ Fully Digital Process:

• End-to-end paperless journey
• No branch visit required, ideal for those posted in remote locations

✅ Instant Processing:

• Approvals and disbursement within 24–48 hours

✅ Flexible Limits:

• Loan amount ranges from ₹25,000 to ₹5 crore
• Ideal for short-term liquidity or planned purchases

✅ No EMI commitment:

• Option to pay only interest monthly and repay the principal anytime when money becomes available

✅ Overdraft Facility:

• Pay interest only on the amount used
• Flexibility to draw and repay as needed

✅ No Credit Impact:

• Since this is a secured loan, credit score is not impacted like personal loans

We have facilitated such LAMFs for defence personnel 

• LTV up to 70–85%, depending on the fund category
• Seamless integration with all the mutual fund companies
• Security-controlled OTP authorization from the client’s side
• Transparent dashboard to track loan limit, usage, and repayment
• Competitive Interest rates.

Practical Uses of Loan Against Mutual Funds (LAMF) for Armed Forces Personnel

1. Renovating or furnishing your home during transfer or new postings
2. Paying for children’s education without disturbing long-term investments
3. Handling unexpected medical needs not fully covered by insurance
4. Managing cash flow for major family events like weddings
5. Bridging short-term financial gaps while waiting for other income (e.g., claims, arrears, CTG etc)
6. Booking a property or deal in advance before funds from another asset are received

How It Works – Step-by-Step Process

1. Login to the platform using PAN, Adhaar card, cancelled cheque and phone number
2. Link your mutual fund folios securely via OTP
3. System auto-calculates eligible loan value (based on LTV)
4. Choose between overdraft or term loan
5. Provide bank details and e-sign loan agreement
6. The loan is disbursed within 24–48 hours.

Important Points to Remember

• Mutual fund units are lien-marked, not transferred.
• Funds remain invested; only in extreme non-repayment cases are they liquidated.
• You can top-up or pre-close the loan anytime.
• It’s advisable to maintain a healthy margin to avoid forced liquidation in market downturns.

Common FAQs

1. Is a loan against mutual funds better than a personal loan for defence personnel?
   Yes. It has lower interest rates, no credit hit, and you retain your investment growth.
2. Can I apply if I am posted in a remote area or on field duty?
   Absolutely. The process is 100% online and mobile-based, making it ideal for defence professionals.
3. Are all mutual funds eligible?
   Most equity and debt mutual funds from top AMCs are eligible. Close-ended or ELSS funds are usually not.
4. What is the minimum and maximum loan amount?
   Minimum ₹25,000; Maximum ₹5 crore depending on portfolio value.
5. How quickly is the loan processed?
   Typically within 24–48 hours.
6. Do I have to submit physical documents or visit a branch?
   No. Everything is done online with secure OTP authentication and e-signature.
7. What if the market value of my mutual funds drops?
   If you’ve taken the maximum possible loan on your mutual funds, then the lender may ask for additional collateral or partial repayment to maintain the LTV ratio.
8. Can I continue SIPs while the lien is marked?
   Yes. You can continue your SIPs. New units will not be lien-marked.
9. Is there a prepayment charge or foreclosure penalty?
   No. You can repay anytime without penalty after maybe a small initial snooze period.
10. Does taking this loan affect my CIBIL score?
    No, unless you default. Since it’s a secured loan, there’s no impact on credit score.

Need quick funds but don’t want to redeem your mutual funds?
Speak to your Relationship Manager at Hum Fauji Initiatives today to explore how a Loan Against Mutual Funds can work for you- fast, simple, and smart.