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For those, who have a long-term view of their mutual fund and shares investments, should explore loans against mutual funds and shares to manage their festive expenses to overcome the cash flow issue.

It is common for our monthly spending to be higher than usual during the festive season, prompting us to seek different ways to fund these expenses. Many individuals tend to dip into their long-term mutual fund or shares portfolios to cover such costs. However, Krishna Kanhaiya, CEO of Mirae Asset Financial Services, recommends considering a loan against mutual funds and shares during the festive season.

Mirae Asset Financial Servis offers loans against mutual fund units and stocks through an overdraft facility.  “We spend more during the festive season. Every year, our monthly spending during Diwali is higher than usual, often stretching our budgets. Most savings are largely invested in mutual funds or shares, and thus, we tend to dip into mutual funds and stock portfolios held for long-term goals to fund such expenses. This is a liquidity issue, not an affordability issue. This is where loans against mutual funds and shares can be handy. If you have a long-term view of your investments, instead of redeeming them, you should consider loans against mutual funds or shares. It is a great tool to manage your cash flows without liquidating your investments” said Krishna Kanhaiya, CEO, Mirae Asset Financial Services.

Moreover, the loan creation process can entirely be done online and location agnostic from anywhere in India in less than 15 minutes including creating a lien on securities and invoking the same on repayment from the comfort of one’s home or office. The borrower has the option to raise the overdraft limit by using the top-up option and can also close the account without any foreclosure charges.

Let’s consider a scenario to explain this better.

Assuming Mr Sharma has a net monthly salary of Rs 1,25,000/- & over the years has accumulated a mutual fund portfolio worth Rs 10,00,000/-

With a monthly interest cost of ~ Rs 690, Mr Sharma can not only manage the festive expenses with ease but also save his long-term investments from redemption and all the costs associated with it.

The utilised amount (principal amount) of around Rs 80,000, in this case, can be repaid anytime during loan tenure of 12 months. Considering the example Mr Sharma can repay the principal amount within 4 to 8 months. Only the interest amount is payable monthly on the amount utilised. No interest will be charged if you keep your account active with zero utilisation.

So, if you have a cash flow issue, then evaluating loans against mutual funds and shares can be beneficial. However, it is advised to evaluate the loan against mutual funds and shares only if you have a long-term view of your investments. If you have invested for the short-term it would be ideal to redeem instead of borrowing.

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