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Key Factors to Consider When Choosing Bank for Loans Against Mutual Funds

This informative guide empowers you to make informed decisions when choosing a bank for a Loan Against Mutual Funds (LAMF). It explores key factors to consider, including interest rates, loan terms, eligibility criteria, and additional services offered by the bank.

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Key Factors to Consider When Choosing Bank for Loans Against Mutual Funds

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  1. Key Factors to Consider When Choosing Bank for Loans Against Mutual Funds Swipe @investkraft

  2. 02/07 01 01 Loan-to-Value Ratio (LTV) Ratio Banks usually lend a percentage of the value of your mutual fund, not the entire amount. This percentage is known as the “Loan-To-Value” ratio. The LTV ratio can differ among banks and types of funds. A higher LTV ratio means you can borrow more. A higher LTV ratio also raises the risk of a margin call. Swipe @investkraft

  3. 03/07 02 02 LAMF Interest Rates LAMF interest rates can be compared across different banks. Generally, LAMF interest rates are lower than personal loan interest rates. LAMF interest rates are higher than home loan interest rates. Swipe @investkraft

  4. 04/07 03 03 Eligible Mutual Funds Check the eligibility of your funds for LAMF at the specific bank where you intend to apply for the loan. Not all banks accept all types of mutual funds as collateral. It is important to ensure that your funds are eligible before proceeding with the application. Swipe @investkraft

  5. 05/07 04 04 Margin Calls and Maintenance In market downturns, mutual fund values may decrease, leading to margin calls from the bank. Margin calls require extra deposits or the selling of units to maintain the LTV ratio. It is important to know the bank’s margin call policy. Determine the amount of buffer you have before facing a margin call. Swipe @investkraft

  6. 05 05 06/07 Bank Reputation and Customer Service Consider selecting a renowned bank known for its long-standing commitment to providing low maintenance fees. Thoroughly examine the bank's customer service track record. Ensure the bank guarantees a seamless banking experience. Swipe @investkraft

  7. 07/07 Was This Helpful ? Be sure to save this post so you can come back to it later! @investkraft

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