GUIDESPERSONAL LOANS
Loan Against SIP: Get Funds Without Selling Mutual Funds | Fi Money
4 MIN • 
LAST EDITED BY RUPALI AMIN ON APRIL 7, 2025.
LAST EDITED BY RUPALI AMIN ON APRIL 7, 2025.
GUIDES LAST EDITED BY RUPALI AMIN ON APRIL 7, 2025.
Taking a loan against your SIPs is a viable option to cover emergency cash requirements while protecting your investments. So, what is a loan on SIP? How does it work? Who is eligible to take a loan against SIP? How to apply? Keep reading to explore these questions and more.
A Systematic Investment Plan (SIP) is a method of investing in mutual funds or stocks where you contribute a fixed amount at regular intervals—typically monthly. Instead of trying to time the market, SIPs help you build wealth gradually through disciplined, consistent investments. They also allow you to benefit from rupee-cost averaging and the power of compounding over time.
Interestingly, you can use your SIP investments to access funds when needed. A loan on SIP allows you to borrow money by pledging the mutual fund units you’ve accumulated through SIP investments as security. The biggest advantage of this method is that you can access credit without having to sell your assets.
When you opt for a loan on SIP, you assign your mutual fund units to the lender, who assesses their value and offers a loan based on a percentage of it—typically between 50% and 70%. The best part? Your SIP investments continue to grow even as you repay the loan through flexible repayment options without interrupting your wealth-building plans.
The loan amount you can receive through a loan against mutual funds like SIPs depends on several key factors:
The current NAV of your mutual fund units plays a major role. A higher NAV usually means a larger loan amount.
Lenders offer loans based on a fixed percentage of the SIP investment's value, called the Loan-to-Value (LTV) ratio. Depending on the mutual fund type and the lender’s policies, the LTV ratio can range from 50% to 70%.
The type of mutual fund also impacts how much you can borrow. For example, equity mutual funds often have a lower LTV ratio compared to debt mutual funds, which can influence the final loan amount.
Your credit score plays an important role when applying for a loan against SIP. A strong credit history assures the lender of your repayment ability and can help you secure better loan terms. A higher credit score might even get you a lower interest rate on your loan against mutual funds.
By leveraging a loan against an SIP or a loan against mutual funds, you can meet your financial needs without liquidating your investments. This allows your money to work for you while providing the liquidity you need.
Opting for a loan against SIP can be smart when you need funds without disrupting your long-term investment plans. Here’s why many investors prefer taking a loan against mutual funds instead of liquidating their assets:
Loans against SIPs are ideal for times when you need instant funds. Since the entire process is digital and requires minimum paperwork, most lenders approve and sanction the loan in minutes.
As an asset-backed borrowing facility, loans against SIPs come with lower interest rates than unsecured loans, like personal loans. This, in turn, reduces your borrowing cost.
Even after pledging your SIP units, your investments remain active and continue to earn returns, helping you stay on track with your financial goals.
Interest on loans against mutual fund SIPs is not calculated on the sanctioned loan amount. Rather, it is calculated based on the utilised sum and the duration of use. This makes managing the repayments easy and affordable.
If your cash flow requirement is only short-term, loans against SIPs may be your best bet to raise funds. Instead of redeeming your investment, you can instantly meet your credit requirements and repay the loan.
Many lenders offer convenient and flexible repayment terms, making it easier to manage your loan while maintaining your SIP contributions.
Applying for a loan on SIP usually involves less paperwork and faster processing compared to other forms of loans.
Confirm that your Mutual Funds SIP holdings are eligible for the lender’s criteria.
Compare loan offers from different banks, NBFCs and other financial institutions.
This can be done online or offline, with the necessary details and documents like folio numbers, scheme names etc.
Select the funds and number of units you wish to pledge through RTA.
Based on the LTV, the lender approves the loan amount, executes the loan agreement, and disburses the funds.
To apply for a loan against SIPs, you’ll require the following documents:
Keep your PAN Card handy during the application process.
This could be your Aadhaar Card, Passport or utility bills with your address clearly visible.
Ensure that this is your latest statement.
Your bank details will be verified for disbursal.
While loans on mutual fund SIPs are advantageous, they come with some risks too. Here are some costs and risks related to loans against mutual funds that one must keep in mind:
Interest rates on loans against SIPs are generally lower than those on traditional personal loans. However, they can vary based on the lender’s policy, your credit score, and the type of mutual fund pledged (equity or debt). A higher credit score and pledging certain types of funds may help you secure better rates.
Depending on the lender and platform, the processing fees and additional charges may be applied to your loan against SIP. Read the terms and conditions clearly before applying for a loan.
Market volatility can directly impact a loan against SIP or a loan against mutual funds. If the Net Asset Value (NAV) of your pledged mutual fund units drops significantly, the Loan-to-Value (LTV) ratio may exceed the lender’s acceptable limits.
When this happens, you could face a margin call — meaning you may be asked to either make a partial repayment or pledge additional mutual fund units to maintain the required LTV ratio. It's important to monitor your investments closely when you opt for a loan on SIP to avoid sudden repayment pressures.
A loan against mutual funds is still a loan, which requires you to pay regular interest. If you skip paying interest for any month, the unpaid amount could get compounded, leading to a larger interest burden in the future.
Unless you repay the loan and the interest fully and remove the lien marked on your investments, you cannot redeem or sell your mutual funds.
| Feature | Loan against SIP | Personal Loan | Stopping SIP | Redeeming units |
| Collateral | MF units | None(usually) | N/A | N/A |
| Interest rate | Moderate | High | N/A | N/A |
| Impact on investments | Continue investing | No impact | Investments discontinued | Investments discontinued |
| Tax impact | None (on the loan) | None | None | Capital Gains Tax |
| Approval speed | Moderate-Fast | Fast | Instant | Fast |
| Key risks | Margin call | Loan defaulting | Not reaching goals | Market timing |
Loans against SIPs can help you raise an instant line of credit without abandoning your financial plans. These loans are much better alternatives to traditional credit facilities like personal loans, especially when you need low-cost instant funds for short-term use. However, weighing your options and thoroughly checking the lender’s policy is always prudent to see if your SIP investments qualify for the loan.
No, you can't get a loan against SIPs in ELSS funds during the 3-year lock-in period. However, depending on policies, some lenders may allow it after the lock-in.
Most lenders allow you to continue making SIP investments even when the units are pledged as collateral for a loan against SIP.
Depending on the lender, you can prepay the loan on SIP. Check the lender’s policies for preclosure charges, if any.
This varies among lenders. Check the lender’s policies before applying for a loan on SIP.
This is highly variable, based on the lender’s policies, the applicant’s credit score, the eligibility of the SIP units for a loan, and more.
