A loan against mutual funds may involve interest plus one-time, transaction-based or periodic charges.
Common examples include:
- Processing or login fees
- GST on taxable fees
- Stamp duty
- Pledge or de-pledge charges
- Mandate-bounce charges
- Renewal fees
- Penal charges for non-compliance
Not every lender charges every item.
The Key Fact Statement and lender fee schedule should show the applicable amounts and the APR before you accept the loan.
Separate interest from fees
Interest is the price of the amount used over time.
Fees may cover:
- Processing
- Documentation
- Pledge creation
- Servicing
- Specific transactions or events
A low interest rate can still result in a higher overall cost if the facility carries large upfront or recurring charges.
One-time and transaction charges
Processing and documentation charges generally arise during onboarding.
Pledge or de-pledge charges may arise when mutual fund units are marked or released.
Stamp duty depends on the executed documents and applicable law.
GST generally applies to taxable service fees rather than normal loan interest.
Charges triggered by an event
Certain charges may arise only after a specific event.
Examples can include:
- Failed auto-debit
- Overdue interest
- Excess drawing
- Foreclosure
- Prepayment
- Transfer
Under RBI's penal charges directions, a penalty for non-compliance must be treated as a penal charge rather than added as penal interest.
How to compare two offers
Do not compare loan offers only by their headline interest rates.
Instead, consider:
- Processing fee
- Applicable taxes
- Expected pledge charges
- Annual or renewal charges
- Interest for your expected usage
Then check the APR in the Key Fact Statement.
| Cost type | Typical timing |
|---|---|
| Interest | Accrues on utilised balance |
| Processing/documentation | At application or sanction |
| Pledge/de-pledge | When collateral is marked or released |
| Renewal | At periodic review, if applicable |
| Penal/bounce charges | After specified non-compliance or failed collection |
Ask for an all-inclusive rupee figure
Before proceeding, ask the lender to show:
- Each fee in rupees
- GST on taxable fees
- When each charge is collected
- Whether the charge is refundable
- Whether it applies per facility, folio or transaction
This helps prevent a low headline rate from hiding a high setup or servicing cost.
The Bottom Line
The complete cost of a LAMF facility is:
Interest + applicable fees + taxes
Ask for a rupee-value charge sheet and APR.
Also distinguish normal charges from fees that arise only after a specific action or default.
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.