Loan Against Mutual Funds (LAMF) is one of the smartest ways to access short-term cash without disturbing your long-term investment compounding. Here's everything you need to know.
How LAMF Works
- You pledge your MF units to the lender (units remain in your name, dividends still accrue)
- Lender creates an overdraft limit (60–80% of NAV)
- Draw only what you need; interest accrues only on utilised amount
- Repay anytime; units are released when loan is cleared
Eligible Fund Types & LTV
| Fund Type | LTV |
|---|---|
| Large-cap equity funds | 50–60% |
| Balanced / hybrid | 55–65% |
| Debt / liquid funds | 75–85% |
| ELSS (locked-in) | Not eligible |
Tax Treatment
Pledging does not trigger capital gains tax — only redemption does. This is a key advantage over selling units to fund needs.