Introduction
Systematic Investment Plans (SIPs) are a popular way to build wealth over time. But what if you need urgent funds? Selling your investments isn’t always the best option. Instead, you can opt for a Loan Against SIP, which allows you to borrow money while keeping your investments intact.
In this blog, we’ll explain how a Loan Against SIP works, its benefits, eligibility criteria, and how to apply.
What is a Loan Against SIP?
A Loan Against SIP is a secured loan where you pledge your mutual fund units accumulated through SIPs as collateral. Lenders offer funds based on the Net Asset Value (NAV) of your investments. This loan is a great alternative to personal loans, as it comes with lower interest rates and flexible repayment options.
✅ No Need to Sell Investments – Your SIP continues to grow while you borrow against it.
✅ Lower Interest Rates – Since it’s a secured loan, rates are lower than personal loans.
✅ Instant Loan Approval – Quick processing and disbursal without extensive paperwork.
Example: If you have ₹5 lakh worth of mutual fund units, a bank may offer you up to ₹3 lakh as a loan (based on LTV ratio).
How Does a Loan Against SIP Work?
- You Pledge Your Mutual Funds – Apply for the loan by pledging your SIP investments as collateral.
- Lender Evaluates Your Fund’s NAV – The loan amount is based on a percentage of the current NAV.
- Loan Disbursal – Once approved, the loan is credited to your bank account.
- Repayment – Pay interest on the borrowed amount while your SIP investments continue growing.
Eligibility Criteria for a Loan Against SIP
Most banks and NBFCs have simple eligibility requirements:
✔ Age: 21 years or older
✔ Residency: Indian resident with valid KYC documents
✔ Mutual Fund Type: Equity or Debt Mutual Funds (in Demat or SoA format)
✔ Minimum Investment Value: Typically ₹50,000 or more
🔗 Check detailed eligibility for Loan Against Mutual Funds
Loan Against SIP Interest Rates & Charges
| Lender | Interest Rate (Per Annum) | Processing Fee | Maximum Loan Amount |
|---|---|---|---|
| HDFC Bank | 8.00% – 10.50% | ₹1,999 | ₹10 Crore |
| ICICI Bank | 8.25% – 11.00% | 1% of Loan | ₹5 Crore |
| Bajaj Finserv | 9.00% – 12.50% | ₹999 | ₹3 Crore |
| Axis Bank | 8.50% – 10.25% | ₹2,000 | ₹5 Crore |
💡 Debt mutual funds usually get lower interest rates than equity mutual funds due to lower risk.
Advantages of Taking a Loan Against SIP
🔹 Retain Your Investments – Continue earning returns while accessing liquidity.
🔹 Lower Interest Rates – Much cheaper than a personal loan.
🔹 Flexible Loan Amount – Borrow only what you need, up to a set percentage of your SIP holdings.
🔹 No Credit Score Dependency – Your CIBIL score matters less since the loan is secured.
📌 Related Read: Loan Against Mutual Funds – Everything You Need to Know
How to Apply for a Loan Against SIP Online?
1️⃣ Choose a Lender – Compare banks and NBFCs offering loans against SIPs.
2️⃣ Check Your Eligibility – Ensure your SIP units are in Demat/SoA format.
3️⃣ Apply Online – Visit the lender’s website and fill out the application form.
4️⃣ Pledge Your Mutual Fund Units – Authorize the lender to hold your units as security.
5️⃣ Loan Disbursal – Get funds credited to your account within 24-48 hours.
🔗 Apply for a Loan Against Mutual Funds Online
Things to Consider Before Taking a Loan Against SIP
✔ Loan-to-Value (LTV) Ratio – Lenders offer 50%-80% of your SIP’s value as a loan.
✔ Interest Calculation – Some lenders charge daily interest on the borrowed amount.
✔ Repayment Terms – You can repay the loan in EMIs or as a lump sum.
❌ Risk of Liquidation – If you fail to repay, the lender can sell your mutual fund units to recover the dues.
Is a Loan Against SIP a Good Option for You?
A Loan Against SIP is ideal for individuals who need urgent funds but do not want to disturb their investments. If you have a long-term SIP and need short-term liquidity, this option makes financial sense.
However, if you cannot ensure timely repayments, a personal loan or overdraft facility may be better alternatives.
💡 Explore: Loan Against MF Interest Rates – Compare the Best Deals
Final Thoughts
A Loan Against SIP is a smart way to access funds without selling your investments. It offers lower interest rates, instant disbursal, and flexible repayment options, making it a great alternative to traditional loans.
📌 Looking for the best loan options? Visit our Loan Against Mutual Funds Home Page to apply now!
