Loan-to-value, or LTV, is the percentage of your eligible mutual fund value that a lender is willing to offer as credit.
An LTV of 60% means funds worth ₹10 lakh may support an indicative limit of ₹6 lakh.
The remaining value acts as a safety cushion against market movements.
LTV varies by scheme, fund category, lender policy and regulatory requirements.
LTV is a borrowing ratio
LTV compares the loan limit or outstanding amount with the market value of the pledged collateral.
The simple formula is:
Loan amount ÷ collateral value × 100
A lower ratio means a larger cushion.
A higher ratio gives more borrowing power but leaves less room for a fall in NAV.
Why lenders keep a cushion
Mutual fund values can change every business day.
The lender therefore lends only a portion of the value so the security can still cover the outstanding balance if markets fall.
This cushion is often called the margin or haircut.
Sanction LTV and live LTV
At sanction, LTV helps set the credit limit.
After withdrawal, lenders also monitor the live ratio using the outstanding balance and updated collateral value.
If NAV falls or interest increases the outstanding amount, live LTV can rise even when you make no new withdrawal.
What the borrower should monitor
Do not treat the maximum limit as a target.
Keeping utilisation below the available limit can create room for volatility and reduce margin-call risk.
Review the lender's scheme-wise LTV and maintenance requirements rather than relying on one advertised percentage.
| If collateral value is | And the loan is | The LTV is |
|---|---|---|
| ₹10,00,000 | ₹5,00,000 | 50% |
| ₹8,00,000 | ₹5,00,000 | 62.5% |
| ₹7,00,000 | ₹5,00,000 | 71.4% |
A practical check before you decide
Write down four numbers before accepting the limit:
- Eligible portfolio value
- Scheme-wise LTV
- Sanctioned limit
- Amount you actually plan to use
Then test what happens if the portfolio falls by 10%.
This simple exercise separates borrowing capacity from borrowing need and shows whether you are leaving enough collateral headroom.
The Bottom Line
LTV tells you how much credit your mutual funds can support and how much safety margin remains.
It is calculated against eligible current value, not purchase cost or face value.
A sensible borrower watches both the sanctioned limit and the live LTV after drawing funds.
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.