Loan in lieu of mutual funds: Nowadays, the trend of taking loans in lieu of mutual funds has increased among retail investors. They are now understanding the importance of maintaining investment for long -term. In addition, they are adopting this option because interest rates on loans available on mutual fund investment are lower than individual loans. Investors can find an option to take loans on their mutual fund investment to meet short -term instantaneous requirements.
Loans on mutual funds during recession
There is a slowdown in the stock market. In such a situation, intelligent investors are now adopting a new option to earn income and meet short -term needs instead of extracting their investment from mutual funds. Many investors are taking loans in exchange for mutual funds. Due to which they are getting the benefit of maintaining their investment in addition to low interest rates.
Low interest compared to individual debt
The average interest rate on a loan secured by mutual fund investment is 8 to 15 percent. But most mutual fund companies are giving loans at the rate of 10 to 11 percent. On the other hand, individual loan interest rates are 13 to 20 percent based on risk capacity. Additionally, the individual loan process requires documentation. This process often becomes complicated. Whereas mutual fund companies easily provide loans to investors based on their investment. Investors are taking loans on mutual funds keeping in mind the short -term needs. Additionally, mutual fund investment in equity provides an average return of 14 to 15 percent. Therefore, the investor gets higher returns than the loan interest rate.
Who can benefit from this?
For investors who have been investing in mutual funds for more than five years, it is the best option to get a loan through mutual funds. Because, 50 to 80 percent of their investment can be obtained as loans. Therefore, if you have long -term investment, you can get a good amount as a loan. Apart from this, their average returns are also quite high, so they do not have the burden of interest rates. It is noteworthy that new investors can also take loans in lieu of mutual fund units.
overdraft facility
Mutual fund investors also get overdraft facilities. In which the company allows withdrawal of a certain amount. On which no interest has to be paid on a lump sum. Interest is given only on a monthly basis on the amount used. They can also pay it at their convenience. Additionally, many mutual funds pay zero interest on early repayment.
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