A Loan against Mutual Funds (LAMF) can be used for numerous use cases but it works best when the money required is for the short term or in case of an emergency. LAMF is also ideal when repayment time is uncertain or a conventional loan cannot be availed of due to bank finding you unsuitable for the same.
We list below some of the most appropriate times when a LAMF is the perfect solution for your needs.
You are in Urgent Need of Cash
LAMF is one of the fastest and cheapest ways to get liquidity in your bank account. If you have existing mutual fund investments, the entire process from initiation to disbursal of money can take under 3 minutes! While there are other ways to get a loan online, you would typically have to pay high rates of interest. LAMF, being a secured loan against your assets, has a significantly lower rate of interest.
If you opt for redeeming Mutual Funds, the whole process can take 3 days till the time the funds are credited to your account. If redemption is done on a Thursday or a Friday, the funds get credited to your account the following week. On the other hand, a loan against Mutual Funds is available on the same day. This is particularly helpful in case of medical emergencies and other such times when the funds are needed urgently.
You don’t want to redeem your mutual funds but need money
A LAMF really helps when the market is on an uptrend or when it’s really down. Selling your mutual fund investment to get money when the market is underperforming is a bad idea, as you would miss out on any possible reversal. Similarly, when the investments are trending upward you may not want to redeem them knowing they can increase in value.
Availing a LAMF facility can help you retain ownership of your Mutual Funds and still meet your fund requirements. This way, your investment continues to grow while the loan helps to meet your fund requirements.
You want to pay off high-interest credit card over-dues or you need money until your next salary is credited
There are times when you have an urgent but short term requirement of money until your next liquidity event. LAMF is great for times when you have a credit card payment overdue (Credit card companies charge as high as 40% interest on over-dues!) or when you require money until your next paycheque arrives.
You are a freelancer or self-employed and the bank won’t give you a loan because you don’t have regular cashflows
One of the drawbacks of conventional loans is that the bank looks for regular cashflow such as salary, etc. in order to approve of the loan. This places individuals like freelancers, professionals and the self-employed who may have a decent set of assets but irregular cashflows at a disadvantage.
LAMF is a great option for such people as there is no documentation or income proof required and the loan is issued immediately against existing assets like mutual funds.
Overdraft loans have traditionally been used by companies and the ultra-rich to manage their cashflow needs smartly while keep interest rates low. Digital LAMF has now bought this option possible to all of us. If used well, this can be a great way to avail of loans quickly, cheaply and ensure repayment terms are flexible. Get your own smart instant loan here.
For more information, read Part 1 & Part 3 of the LAMF Special to know how to avail of the LAMF Loan instantly.