# Loan against mutual funds
**URL:** https://tradingqna.com/t/loan-against-mutual-funds/137219
**Category:** Personal finance
**Created:** [October 3, 2022, 8:29am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219 "2022-10-03T08:29:14Z")
**Posts on this page:** 19
**Page:** 3
### Author:  [@Esha](https://tradingqna.com/u/Esha)
#### Post date: [January 29, 2025, 4:58am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/43 "2025-01-29T04:58:08Z")
There are no charges from Zerodha Capital for pledging additional units to make good for the LTV. There’s a minor charge for pledging, that is ₹30 + GST per request, per ISIN, irrespective of the quantity pledged from Zerodha.
To answer your second question, yes, you can pledge any security as long as it is from the [approved list](https://zerodhacapital.com/approved-list). It doesn’t have to be the same as before.
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### Author:  [@tarun2](https://tradingqna.com/u/tarun2)
#### Post date: [January 29, 2025, 5:39am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/44 "2025-01-29T05:39:25Z")
> [@Esha](#):
>
> Yep, 0.25% of the loan value is one of the lowest processing fees charged in the industry, if not the lowest. The standard processing fee generally varies between 0.25% to 1% of the loan value.
HDFC Bank has a much lower processing fee. Fixed at Rs. 1499/-
[Check out Loan Against Securities Interest Rates & Charges offered by HDFC Bank](https://www.hdfcbank.com/personal/borrow/loan-against-assets/loan-against-securities/fees-and-charges).
I hope Zerodha can match that processing fees someday(or atleast have an upper limit) and you will anyway recover that amount with the interest you receive from people. That way you will be able to gather more customers, including ones like me.
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### Author:  [@gpgane](https://tradingqna.com/u/gpgane)
#### Post date: [January 29, 2025, 7:44am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/45 "2025-01-29T07:44:11Z")
When I tried to top up my existing loan, the charges (0.25%) and GST shown in the screen.
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### Author:  [@Esha](https://tradingqna.com/u/Esha)
#### Post date: [January 29, 2025, 9:55am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/46 "2025-01-29T09:55:30Z")
Let me explain the rationale behind this: We don’t have a minimum processing fee here. The least you pay is Rs.62.5 🙂 This is because the minimum disbursement is Rs.25,000. A maximum processing fee of ₹11,250 is charged at a time for a loan. By “maximum”, we mean that this applies to a loan amount of ₹45,00,000 (45% of ₹1 Cr).
The average processing fee across customers is ₹1500. Other standard industry charges such as pre-closure fees, pre-payment charges, etc. are not charged by us. There’s only a penalty if you miss the interest payment, like everyone in the industry charges.
Moreover, Zerodha Capital is an NBFC which needs to borrow from other NBFCs/Banks to further lend this to customers.
Since banks have their own sources of funds, like savings accounts and deposits, they don’t incur additional costs to source capital. On the other hand, as an NBFC, we need to borrow funds from other entities, such as banks and larger NBFCs. This means we also have to pay a processing fee of 0.2% to 0.5% on the borrowed funds, in addition to the interest rate. Even if you choose to leave this out of the context, we are still cheaper than most lenders.
Some lenders charge processing fees based on the CIBIL scores, risk profiling, etc. There are different slabs of interest charged by a few other NBFCs based on the ticket size.
Another point is we don’t have a different interest rate for customers generating more revenue and customers generating less. It’s a flat interest rate of 11.5%. There are different slabs of interest charged by a few other NBFCs based on the ticket size.
Having said all this, we’ll look into the possibilities of having an upper cap on the processing fees.
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### Author:  [@Esha](https://tradingqna.com/u/Esha)
#### Post date: [January 29, 2025, 9:58am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/47 "2025-01-29T09:58:25Z")
Correct, processing fees are charged whenever there is a disbursement. However, there is no processing fee if you’re pledging shares to reduce your LTV.
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### Author:  [@tarun2](https://tradingqna.com/u/tarun2)
#### Post date: [January 29, 2025, 10:13am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/48 "2025-01-29T10:13:16Z")
Thanks for the detailed reply!!
I agree with the cost of funds with this being a NBFC.
However having a flat interest for all customers is not always a good thing. Some customers, who are low risk, do deserve power interest rates.
Regarding the pre payment charges, most of the banks offering LAS do it via Overdraft account and hence don’t have pre payment charges.
One more thing I’d like to ask is - Do you plan on having different interest rates for debt mutual funds in the future?
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### Author:  [@Esha](https://tradingqna.com/u/Esha)
#### Post date: [January 29, 2025, 10:47am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/49 "2025-01-29T10:47:42Z")
Hmm, there are no plans currently on adding debt funds. We only offer equity mutual funds. If and when we do, we’ll keep you posted.
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### Author:  [@gpgane](https://tradingqna.com/u/gpgane)
#### Post date: [January 29, 2025, 12:32pm UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/50 "2025-01-29T12:32:39Z")
The 18% penalty rates starting on which days ? The day immediately after LTV crossing 50% or seven days later from mail intimation day ?
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### Author:  [@tallerballer](https://tradingqna.com/u/tallerballer)
#### Post date: [January 29, 2025, 4:21pm UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/51 "2025-01-29T16:21:03Z")
> [@Esha](#):
>
> Moreover, Zerodha Capital is an NBFC which needs to borrow from other NBFCs/Banks to further lend this to customers.
Are you saying zerodha capital doesn’t use funds from Zerodha’s profits?
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### Author:  [@Esha](https://tradingqna.com/u/Esha)
#### Post date: [January 30, 2025, 4:30am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/52 "2025-01-30T04:30:30Z")
Penalty is charged only if there is an interest overdue, there is no penalty for anything else.
There is no penalty if the LTV shoots up. You will have to bring in funds or pledge additional shares/units to bring the LTV down. Failing to do this will lead to confiscation of your securities. Check the [FAQ](https://zerodhacapital.com/tos/faq) section.
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### Author:  [@Esha](https://tradingqna.com/u/Esha)
#### Post date: [January 30, 2025, 9:41am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/53 "2025-01-30T09:41:12Z")
Check this [circular](https://nsearchives.nseindia.com/content/circulars/COMP50957.pdf) by NSE that came out in 2022. Broking entities are not allowed to invest in NBFCs. 😀
Check point 10 on the circular:
“Investments made in group companies such as subsidiaries & associates etc., not in connection with or incidental to or consequential upon the securities/ commodity derivatives business. (Ex: Investment in companies engaged in other businesses such as NBFC, Real Estate etc.)”
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### Author:  [@gpgane](https://tradingqna.com/u/gpgane)
#### Post date: [February 15, 2025, 12:50pm UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/54 "2025-02-15T12:50:56Z")
Any plan on reducing the rate as rbi reduced the repo rate ? @Esha @nithin
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### Author:  [@Esha](https://tradingqna.com/u/Esha)
#### Post date: [February 16, 2025, 2:24am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/55 "2025-02-16T02:24:56Z")
No 🙂 we have no plans to revise our interest rates as they aren’t directly linked to the repo rate. Our interest rate decisions are based on multiple factors including overall economic conditions, borrowing costs, and internal policies.
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### Author:  [@Abhi\_001](https://tradingqna.com/u/Abhi_001)
#### Post date: [July 4, 2025, 6:18am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/56 "2025-07-04T06:18:51Z")
Is anyone aware who is offering the lowest rate of interest for LAS after RBI rate cut?
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### Author:  [@BB789](https://tradingqna.com/u/BB789)
#### Post date: [July 4, 2025, 9:01am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/57 "2025-07-04T09:01:33Z")
@Esha Makes no sense, Repo rate is directly linked to:
> [@](#):
>
> overall economic conditions, borrowing costs
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### Author:  [@Esha](https://tradingqna.com/u/Esha)
#### Post date: [July 4, 2025, 10:15am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/58 "2025-07-04T10:15:47Z")
So borrowing costs here mean our borrowing costs from other lenders/NBFCs. Btw, we’ve slashed our rates to 11%. We passed on the benefit as and when our borrowing cost started coming down. Not all borrowing rates are linked to repo rates. They are also linked to MCLR rates of banks, and to T-Bills. Banks and lenders generally take a couple of months to pass on the rate benefit to us.
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### Author:  [@gpgane](https://tradingqna.com/u/gpgane)
#### Post date: [November 8, 2025, 5:00am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/59 "2025-11-08T05:00:56Z")
@Esha commodity fof are not approved till date ? Any progress?
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### Author:  [@Esha](https://tradingqna.com/u/Esha)
#### Post date: [November 8, 2025, 5:58am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/60 "2025-11-08T05:58:25Z")
Commodity FOFs have exposure to Gold and Silver. RBI recently came up with a [circular](https://www.ibja.co/Upload/GovtCircular/Reserve%20Bank%20of%20India%20(Lending%20Against%20Gold%20and%20Silver%20Collateral)%20Directions,%202025%20RBI%20notifications.pdf) that bars borrowing against primary gold or silver or financial assets backed by primary gold or silver, e.g., units of Exchange-traded funds (ETFs) or units of Mutual Funds. We’re not allowed to lend against commodity FOFs.
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### Author:  [@Bulwark\_Capital](https://tradingqna.com/u/Bulwark_Capital)
#### Post date: [March 31, 2026, 8:12am UTC](https://tradingqna.com/t/loan-against-mutual-funds/137219/61 "2026-03-31T08:12:15Z")
Don’t focus on platform — focus on terms
**Pick one with:**
1. Low interest (~9–11%)
2. Overdraft (OD)
3. Supports non-demat MFs (easier)
OD is standard (pay interest only on used amount)
**Decision:**
- Short-term need → Loan (better)
- Long-term / big amount → Redeem
Keep loan only if you can repay fast (else interest kills returns).
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