Loan Against Mutual Funds (LAMF) stands out due to its flexibility, particularly in terms of the absence of any lock-in period. Here’s a breakdown of what this means and its advantages:
There are various benefits of Loan Against Mutual Funds (LAMF) but the major one is that there is no lock-in period in this type of loan. There is no lock-in in terms of minimum funds utilization, the period for which you need to repay the loan, and no lock-in in terms of repayments. The only thing that you must note is that once you have repaid the loan and requested closure of the account, the un-pledging of your securities will take around 3-4 working days.
Most loans, including Personal come with a minimum lock-in period, penalty & charges. Unlike many other loans, you can repay your outstanding amount in loan against mutual funds and ask for foreclosure of your account without any penalty or charges at your will.
Given that there is no lock-in period and no charges for non-utilization of funds, LAMF as a financial product is a much cheaper and safer credit option for your emergency needs as compared to Credit Cards, where the borrowing cost is significantly higher at 24 to 36% p.a. as compared to LAMF at 10 to 12% p.a.
In case you are evaluating your options, you must consider LAMF before taking any loan.