Personal Loan or Loan Against Mutual Funds Units? Financial emergency can happen to anyone at any time.
This may come in case of a medical emergency or to meet some financial need. But many of us are not in a position to meet this financial emergency.
In such a situation, the only option left is to take a loan from somewhere. In this, one option for taking immediate loan is personal loan, which can be easily availed.
Another solution is that you can take a loan (Loan Against Mutual Funds) against your mutual funds unit. Both these loans are available easily and in less time, but first see which will be better for you as per the information given on banks’ websites and fund house reports:
Loan Against Mutual Fund
Loan against mutual fund is a secured loan.
In this, you have to pledge your mutual fund units as collateral in exchange for the loan amount. Your loan amount depends on the value of your mutual fund units.
The interest rate on loans taken against mutual funds is also lower as compared to personal loans.
The interest rate on loan against mutual funds is 9 to 10 per cent whereas even if the credit score is good, the interest on personal loan is around 12-13 per cent.
Offers from mutual fund houses
Most of the mutual fund houses are offering loans to investors against the investments made by them.
The objective behind Term Loan Against Mutual Funds is that investors can avail funds to meet their emergency needs while still staying on track with their investment plans.
Its specialty is that for this they do not need to redeem their investment. He can remain on his goal.
Loan Against Mutual Fund: Advantages and Disadvantages
You can take a loan against your mutual fund investments for medical emergency, education or travel.
This is a secured loan, the loan process may be a little longer than a personal loan. The documentation process is lengthy as loan eligibility is based on the value of the security.
In this, generally different banks are giving loans ranging from Rs 50 thousand to Rs 20 lakh. Some institutions are offering even higher loans.
Generally, credit score is not a hindrance in loan against mutual fund.
The interest rate is low because it is a secured loan and there is no loan risk for the lender.
There is no need for pre-payment penalty.
This loan is given as overdraft facility. Withdrawal, tenure and repayment period are flexible.
Personal Loan: Advantages and Disadvantages
Personal loan is an unsecured loan. You do not require collateral for such loans.
Loan tenure can be from 12 months to 60 months. There is a penalty on pre-payment in personal loan.
If you have a good credit score, you are eligible for a personal loan at a lower interest rate.
The documentation process is easy; ID, address proof and income certificate are required as key documents.
Loan disbursal is fast. In this, lenders usually offer loans ranging from Rs 20 thousand to Rs 40 lakh.
Other charges like processing fee, insurance charge, service charge may have to be paid on unsecured loan.
