Interest is charged only on the amount you withdraw, not the full sanctioned limit.
It is calculated daily on the utilised closing balance using the applicable annual rate. Withdrawing more increases the interest, while repayment reduces it from the date credited.
Interest is usually collected or added monthly, depending on the lending partner.
The applicable rate, APR, billing date and charges are listed in your Key Fact Statement.
Why the unused limit does not cost interest
A loan against mutual funds is generally structured as an overdraft or credit line.
If the sanctioned limit is ₹5 lakh but you use ₹2 lakh, the normal interest-bearing balance is ₹2 lakh.
The unused ₹3 lakh remains borrowing capacity, not a disbursed loan.
How the daily calculation works
The rate is quoted per annum but applied day by day.
A simple illustration is:
Daily interest = Utilised amount × Annual rate ÷ 365
At ₹2 lakh and an illustrative 10.5% annual rate:
Daily interest ≈ ₹57.53
Repayment changes the next calculations
If you repay ₹50,000 and it is credited today, future daily interest is calculated on the reduced balance of ₹1.5 lakh.
A fresh withdrawal later increases the balance from its posting date.
This makes timing important when cash is available for part-payment.
Collection method can differ
Interest normally accrues daily and is posted or collected monthly.
A partner bank may debit it to the overdraft account or collect it through a linked bank mandate.
Use the lender-issued Key Fact Statement for the exact billing date and APR, not an advertised starting rate.
| Interest input | Illustrative value |
|---|---|
| Sanctioned limit | ₹5,00,000 |
| Amount used | ₹2,00,000 |
| Illustrative rate | 10.5% p.a. |
| Approximate daily interest | ₹57.53 |
| Approximate 30-day interest | ₹1,726 |
A quick interest check
Before drawing, estimate the cost using:
Amount × Annual rate × Expected days ÷ 365
Also:
- Add disclosed fees
- Confirm the monthly billing date
- Check whether interest is debited to the overdraft or a linked account
- Recalculate after a large repayment or fresh withdrawal
The daily balance changes whenever money moves in or out of the facility.
The Bottom Line
LAMF interest follows a simple principle: pay for the money used and the days it remains used.
Your daily closing balance, applicable annual rate and billing cycle determine the charge.
Repaying earlier lowers future interest; withdrawing again increases it.
Facing a financial emergency?
Check how much credit your mutual funds may support
Get an indicative eligibility check. The final limit and terms are decided by the lending partner.
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Information on this page is general in nature. Eligibility, approved schemes, LTV, rates and charges depend on the regulated lender's current policy and the final loan documents. This is not financial advice. The content is purely for educational purposes.