Loan Against Mutual Funds (LAMF) is one of the most flexible loan payment products in the market. LAMF is an overdraft facility, where interest is charged only on the amount utilised against a sanctioned limit. It means, that if the sanctioned limit is Rs.10 lacs, but you have borrowed only Rs.1 lac, then interest will be charged only on the outstanding amount and not on the entire sanctioned limit that too for a period for which it is used.
You can continue to pay monthly interest and use the facility for the entire tenure. At the end of the tenure, you have to repay the principal with the interest. Having said that, the borrower can repay the entire outstanding amount and foreclose the account without any foreclosure penalty. Likewise, there is no penalty for non-utilization. In the case of Personal loans, both the non-utilization of sanctioned facilities and the foreclosure before the end of tenure attract penalties.
In case, you want to foreclose the account and unpledged your securities, you are free to do so at your will anytime during or at the end of tenure without any extra charges or penalty. One must note that once you repay and request for closure of an account, the un-pledging of securities takes around 3-4 working days. Get all details on lock-in period in loans against mutual funds
Repayment of interest is generally deducted directly from your bank account using bank mandates but you can repay the principal unpledged directly by crediting the lender’s designated account or by way of using various other payment methods provided by payment gateways. It is easy and hassle-free and can also be paid through UPI or your bank account.
In case you are evaluating your options, you must consider LAMF before taking any loan.
- Closure lock-in pledging: The borrower decides to foreclose the account and unpledged securities that you have given during giving the loan. You can do so at any time during or at the end of the tenure without incurring any extra charges or penalties. The process of un-pledging securities typically takes around 3-4 working days after repayment and closure request.
- Modes of Repayment: While interest payments are deducted automatically from your bank account, you can credit the lender’s designated account directly. Various payment methods, including payment gateways and UPI, are available for this purpose, making repayment convenient and hassle-requested. Check out our How to Repay a LAMF Loan.
- Flexibility and Considerations: Unlike personal loans, where non-utilization or early repayment may attract penalties, LAMF offers flexibility with no such penalties. It’s advisable to consider this flexibility and ease of repayment when evaluating your loan options.
In conclusion, LAMF provides borrowers with flexibility in repayment terms, allowing them to manage their finances efficiently. After three years of paying interest monthly or repaying the principal early without penalties, borrowers have the freedom to choose what suits their final non-utilization best. When considering loans, especially against mutual funds, understanding these repayment mechanisms can help borrowers make informed decisions aligned with their financial goals.
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