So, You Need Cash, But Don't Want to Raid Your ELSS Piggy Bank? Introducing Loans Against ELSS!
Let's face it, life throws curveballs faster than a professional pitcher on a sugar rush. Sometimes, those curveballs come in the form of unexpected expenses that leave you staring at your bank account like a dog at a closed treat jar. But fear not, fellow financially responsible individual, because there's a way to access some cash without disturbing your precious ELSS (Equity Linked Savings Scheme) mutual funds. It's called a loan against ELSS, and it's like magic, but with slightly less smoke and mirrors (and hopefully, no disappearing rabbits).
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| How To Get Loan Against Elss Mutual Funds |
But First, a Word (or Two, or Three) About ELSS
ELSS funds are like superheroes in the investment world. They not only help you grow your wealth over time, but they also come with the added perk of tax benefits. However, ELSS funds have a lock-in period of 3 years, which means you can't just withdraw your money whenever you want.
Reminder: Short breaks can improve focus.
Enter the Loan Against ELSS: Your Knight in Shining… Well, Maybe Not So Shiny, But Definitely Helpful Armor
A loan against ELSS is essentially a loan you can take out using your ELSS units as collateral. Think of it like borrowing against the value of your house, but instead of your house, it's your mutual fund units. The lender will assess the value of your units and offer you a loan amount, usually up to 50% (depending on the lender and type of ELSS fund).
Tip: Read slowly to catch the finer details.
Here's the best part: you don't have to sell your ELSS units to get the loan. They simply act as a guarantee for the lender. You can continue to benefit from the potential growth of your investment while using the loan amount for whatever emergency (or not-so-emergency) needs you have.
Tip: Take mental snapshots of important details.
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So, How Do You Get This Magical Loan?
The process is pretty straightforward, though it might involve a few forms and some document verification. Here's a quick rundown:
Tip: Keep the flow, don’t jump randomly.
- Check Your Eligibility: Not all ELSS funds are eligible for loans. Make sure yours is on the list before you get your hopes up.
- Choose Your Lender: Banks, NBFCs (Non-Banking Financial Companies), and even some online platforms offer loans against ELSS. Shop around and compare interest rates and other terms.
- Apply for the Loan: Fill out the application form, submit the necessary documents, and wait for the lender's approval.
- Once Approved: Once you get the green light, you'll receive the loan amount, and your ELSS units will be marked as "pledged" until the loan is repaid.
Important Things to Remember (Because Nobody Likes Surprises, Except Maybe on Birthdays)
- Interest Rates: Loan against ELSS comes with interest, so factor that into your repayment plan.
- Loan-to-Value Ratio (LTV): This is the percentage of your ELSS unit value that you can borrow. It's usually around 50%, but it can vary.
- Repayment: Make sure you repay the loan on time to avoid any penalties or, worse, the lender selling your ELSS units to recover their money (which would defeat the whole purpose, wouldn't it?).
The Bottom Line
A loan against ELSS can be a helpful tool when you need some cash without disturbing your long-term investment goals. Just remember to use it responsibly, compare terms before you commit, and don't forget to repay on time. After all, responsible borrowing is the key to financial freedom, not instant ramen noodles (although, they do have a certain nostalgic charm).
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