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Loan Against Mutual Funds vs. Gold Loans

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Created on
October 6, 2023


What’s Inside

Most of us consider leveraging our assets to secure funds when in need of immediate funds. Loans against mutual funds and gold loans are common financial products that can offer financial assistance in times of need. However, choosing between these two secured loans often becomes a daunting task. 

In this blog, we discuss the loan against mutual funds vs. gold loans debate in detail to help you make a wise choice.

What is a Gold Loan?

A gold loan is a secured loan you can obtain by pledging your gold ornaments to the lender. The pledged gold remains with the lender until the debt is paid off. Moreover, the lender reserves the right to auction off the gold items if you fail to repay the loan.

What is a Loan Against Mutual Funds?

A loan against mutual funds is a credit facility that allows you to pledge your mutual fund units as collateral to secure a loan amount. The lender holds your mutual fund units until you repay the loan while your investments continue to earn returns. 

Differences: Loans Against Mutual Funds vs. Gold Loans

You should be cognizant of the differences between loans against mutual funds and gold loans to choose wisely between these two options. Here’s a side-by-side comparison to clarify the loan against mutual funds vs. gold loan debate:


Loan Against Mutual Funds

Gold Loan

Eligibility Criteria

Select mutual fund schemes approved by the lender.

Purity of gold (18-22 Karat).

Loan to Value Ratio (LTV)

Up to 50% of the NAV for equity MFs and 70% for debt MFs.

Up to 75% of the gold value.

Interest Rates

10%-12% p.a. 

7%-20% p.a.

Interest Calculation

Calculated on the used principal sum and its duration of use.

Calculated on the borrowed principal amount and loan tenure.

Loan Amount Calculation

Calculated based on fund type and their Net Asset Value (NAV). 

Calculated based on the purity and quantity of pledged gold. 

Maximum Loan Amount

Up to Rs. 5 Crore

Up to Rs. 1.5 Crore.


6-36 months.

12-84 months.

Processing Time

Immediate processing once you get a lien on the funds.

It can take a few days to evaluate the assets and sanction the loan. 

Prepayment/Foreclosure Charges

Usually no prepayment or foreclosure charges are levied.

Depends on the lender’s policy.


Pay interest monthly and the principal at the end of the tenure, or choose EMI payments.

Greater flexibility and more options in the form of one-shot payments, EMIs, bullet payments, and deferred principal payments.

Loan Terms

Some lenders allow a proportion of the MF units to be reclaimed after partial payment. 

You can only retrieve the pledged gold assets once the entire loan is repaid.

So, Which One is Right For You: A Loan Against Mutual Funds vs. Gold Loan

The differences highlighted in the loan against mutual funds vs. gold loan comparison clearly show that both have their merits and demerits. You can choose a LAMF for short-term credit requirements and pay interest only on the sum used. Alternatively, you can opt for gold loans if you require credit for a longer duration and prefer flexible repayment options. At the end of the day, your choice should coincide with the assets you own, your repayment capacity, and immediate funding requirements. 

Choose Instant Loans to Meet Immediate Needs

Don’t have time to pledge your assets for an immediate need? Opt for an instant loan from Fi Money instead. Fi Money provides instant loans that arrive directly in your savings account. These are pre-approved personal loans made available to select users with good credit scores. On Fi, this process is 100% paperless, and the loans are provided at competitive interest rates — where each user remains in control with complete visibility of all details. Plus, you can avoid EMI late fees by setting up automatic in-app payments. Our licensed partner bank assigns an eligible loan amount to each user (up to ₹5 lakh). 

Frequently Asked Questions

1. How does the eligibility criteria for loans against mutual funds compare to gold loans?

Your MF units should fall under the select list of mutual fund schemes approved by the lender for the LAMF facility. For a gold loan, your assets should meet the lender’s purity bar, i.e., range from 18-22 Karat. 

2. What is the loan-to-value (LTV) ratio for loans against mutual funds vs. gold loans?

The NAV of the asset decides the LTV ratio for a LAMF. The cap for LTV is set at 50% of the NAV for equity funds and 80% of the NAV for debt funds. The LTV ratio is capped at 75% of the gold’s market value for gold loans. 

3. What are the interest rates typically associated with loans against mutual funds and gold loans?

Generally, interest rates for LAMF are lower than gold loan interest rates. Interest rates for LAMF can range from 10%-12%, while gold loans can range from 7%-20%. 

4. Are there any tax implications or benefits for loans against mutual funds and gold loans?

No. As such, no tax implications or benefits are associated with either loan against mutual funds or gold loans. 

5. How does the repayment process differ between these two types of loans?

For LAMF, you can pay only the interest monthly, paying the principal at the end of the tenure. You can choose different repayment options for gold loans, including one-shot payments, EMIs, bullet payments, or deferred principal payments.


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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