Exploring LAS & LAMF: A Smart Way to Fund Short-Term Goals
Join CA Rachana Ranade as she explores the concept of Loans Against Securities (LAS) and Loans Against Mutual Funds (LAMF), an alternative to personal loans for short-term financial needs.
- Here are the 22 clean bullet points summarizing the video:
- Meet Bunty, a young professional who needs to fund his short-term goal of paying for his CFA exam fees.
- Bunty learns about Loan Against Securities (LAS) and Loan Against Mutual Funds (LAMF), which can be used as an alternative to personal loans.
- LAS allows you to keep stocks as collateral and borrow against them, while LAMF lets you use mutual funds as collateral.
- The key features of LAS and LAMF include:
- ‣ Accessing funds without selling investments
- ‣ Lower interest rates compared to personal loans
- ‣ Credit line functionality (you can withdraw and repay the loan amount)
- ‣ 100% digital and paperless process
- You can top up your loan by adding more stocks or mutual funds to your portfolio.
- LAS/LAMF offer a minimum loan amount of ₹25,000 and a maximum loan amount of ₹5 crore.
- The Loan-to-Value (LTV) ratio for approved stocks/ETFs is 45% and for debt ETFs, it's 75-85%.
- The interest rate ranges from 10.5% to 10.9% per annum, only on the outstanding loan amount.
- There is a processing fee of ₹999 or 1% of the loan amount, whichever is higher, plus GST.
- The processing time for LAS is 12 p.m. of the next morning, while for LAMF, it's within 2 hours.
- The loan tenure is 3 years, and there are no early repayment charges.
- Repayment of principle is flexible, but interest will be auto-debited monthly.
- Top 5 key concerns include:
- ‣ Impact of market fluctuations (Smallcase has a 5% buffer)
- ‣ Receiving dividends or bonus shares
- ‣ Selling pledged holdings (not allowed until the loan is repaid)
- ‣ CIBIL score not being impacted for eligibility checks
- ‣ Defaulting on the loan (may result in losing pledged securities)
- To apply for LAS/LAMF, you need to:
- ‣ Be an Indian citizen between 18-70 years of age
- ‣ Have an active PAN card linked to your bank account
- ‣ Have eligible securities or mutual funds in a Zerodha demat account (for LAS) or eligible mutual funds (for LAMF)
- You can apply for the loan and manage it through the Smallcase app:
- ‣ Download the app, navigate to the credit tab, check your available credit limit
- ‣ Provide PAN and phone number linked to your Zerodha account
- ‣ Select the amount you wish to withdraw and complete KYC verification
- ‣ Add a bank account to receive funds, set up an e-mandate for monthly interest auto debits, pledge securities, and sign the online loan agreement.
Source: CA Rachana Phadke Ranade via YouTube
❓ What do you think? What alternatives to traditional funding options, like personal loans, might be available for short-term goals, such as Bunty's CFA exam fees? Feel free to share your thoughts in the comments!