What is the interest rate on a loan against mutual funds?

There is no single interest rate for every loan against mutual funds.

The applicable annual rate depends on factors such as:

• The lender
• The specific loan product
• The lender's benchmark or internal pricing
• Borrower profile
• Collateral mix
• Prevailing market conditions

A displayed starting rate is only indicative until the lender issues the sanction letter and Key Fact Statement.

Compare the APR as well as the interest rate because fees can change the effective cost of borrowing.

Why rates differ

Banks and NBFCs have different:

• Funding costs
• Benchmarks
• Risk policies
• Operating models

Because of this, the same borrower may receive different offers from two lenders even when pledging similar mutual funds.

Rate versus daily rupee cost

The percentage rate matters, but the amount borrowed and the number of days you use the money matter as well.

For example, if you use ₹1 lakh for 30 days:

• At 10.5% p.a., approximate interest is ₹863
• At 11.5% p.a., approximate interest is ₹945

A one-percentage-point difference changes the cost, but your utilisation and borrowing duration also have a major impact.

Use APR for comparison

The interest rate is only one part of the total borrowing cost.

APR, or Annual Percentage Rate, includes the annual cost of credit along with applicable associated charges.

The lender-issued Key Fact Statement should disclose:

• Annual interest rate
• Rate type
• APR
• Applicable fees

This makes it easier to compare different loan offers.

An illustration of different ROIs

Varicash can show partner options during the loan journey, but the lender remains the source of the final rate and terms.

Since pricing can change, rely on the current offer and Key Fact Statement rather than an older brochure or calculator result.

Compare the rate correctly

Before choosing a lender, ask for:

• The annual interest rate
• Whether the rate is fixed or floating
• The applicable benchmark
• The lender's spread
• Reset frequency
• APR

Then estimate the rupee cost using your likely average balance rather than the maximum sanctioned limit.

A slightly higher rate with lower fees may be cheaper for short-term borrowing.

A lower rate becomes more important when the balance is larger or remains outstanding for longer.

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.