Have you experienced bad phases due to the unavailability of quick money? The need for money is endless. We all require quick access to cash due to various needs. But do you know the best option that not only reduces your interest but also allows you to borrow a good amount of cash as credit? Let us discuss LAMF- the best short-term loan product that not only saves you from hefty interest payments but also allows you to get capital in a few hours.
What Is a Loan Against Mutual Fund?
To fully understand the benefits you get on your interest payment through Loan Against Mutual Funds it is important to grasp what a loan against a mutual fund is.
A Loan Against Mutual Fund (LAMF) is a type of secured loan given to investors by keeping his or her portfolio as collateral. This type of loan is provided by banks as well as NBFCs. To get a complete idea regarding Loan Against Mutual Fund and what its advantages are, read our blog Advantages Of Loan Against Mutual Fund now!
How Loan Against Mutual Funds Beat Interest Rate Debt
To beat the interest rate on any loan, you need to use an asset as collateral that has a higher rate of return than the interest rate you pay on your loan. For instance, if you invest in large-cap mutual funds that have companies like Reliance, ITC, TCS, Wipro, etc in their portfolio, you will get a 15% return on investment per year easily. If you have invested Rs 10 lakh in such a large-cap mutual fund and have taken a loan against your mutual fund at 12% per annum, even after paying the interest, you will still make a 3% profit. Know more how to Beat High-Interest Debt Through LAMFs
What Points You Should Keep In Mind While Trying To Beat Interest Rate Debt
Selecting High-Yielding Assets
You will agree that you can beat any loan interest rate by generating a higher rate of return on the loan amount. But In India, the majority of people invest and take loans against low-yielding assets like gold, silver, property, etc. All these assets are safe-heaven assets thus you get an annual compounding return of 3% – 5% only which sometimes isn’t enough to beat inflation. When you take a loan by keeping these assets as collateral you need to pay an interest of 6% – 8% per annum while you earn a yield or interest of only 3% – 5% per annum on these assets value resulting in a loss of 2 %.
On the contrary, a Loan Against Mutual Funds is offered at an interest rate of 10% – 11% per annum. However, the yield you get on your mutual fund is approximately 15% per annum. This results in a gain of approximately 3% year on year.
Selecting A Low-Interest Rate Loan
The second most important consideration that you should keep in mind while preparing your strategy to outperform your loan’s interest rate is the amount of interest you will be paying throughout the loan tenure.
For example – If you take a loan against a property, it is given at an interest rate of 6.5% – 8% per annum, but the property against whom you have taken the loan will not yield more than 5% thus costing you a loss of 1.5% – 3%.
On the contrary, if you take a loan against mutual funds or against any securities you will have a gain of 3% due to lower interest and higher return on your portfolio. To get the correct idea of money that you can save with LAMF check out Neoble’s Loan Against Mutual Fund Calculator.
Selecting A Good And Trusted Lender –
Previously only banks were allowed to give loans to individuals but things have taken a 360° turn now. You will find many companies offering you small credit at high interest rates. Most of them are small players as big lenders can provide you loans at a much more competitive rate. Ho, however the value you get with big lenders is much higher than the value provided by small lenders. The biggest of them is the safety as with big lenders your assets are line-marked and protected. Plus you also get a robust risk and operation service with a trusted lender. All these reasons make users go with a creditable registered bank or NBFC like Neoble – the best LAMF startup in India. With Neoble you get Loan Against Mutual Funds at the lowest interest rate which not only saves you money but also allows you to get money in a few hours. To know more about the amount of loan you can get on your mutual fund’s portfolio contact us now!