India’s fintech ecosystem continues to evolve rapidly, with innovations that make financial services more accessible, transparent, and convenient. In one such move, PhonePe, a leading digital payments platform, has entered the collateral-backed lending space by launching Loans Against Mutual Funds (LAMF) in partnership with DSP Finance.
This product enables users to borrow up to ₹2 crore instantly, using their mutual fund investments as collateral, without selling or disrupting their long-term wealth-building plans.
Let’s explore how it works, who it’s for, and why it’s one of the most investor-friendly offerings in the current financial landscape.
PhonePe and Loan Against Mutual Funds
A Loan Against Mutual Funds (LAMF) is a credit facility where you can borrow money by pledging your mutual fund units. Instead of redeeming investments prematurely (and possibly incurring capital gains tax or missing out on future growth), you can unlock liquidity while your investments remain intact and continue to earn returns.
PhonePe’s LAMF is integrated into its app, offering a paperless, fully digital, and real-time lending experience.
Product Features at a Glance
| Feature | Description |
| Loan Limit | Up to ₹2 crore |
| Collateral | Select mutual fund schemes eligible for pledging |
| Loan Type | Overdraft-style loan (reusable limit) |
| Repayment | Interest-only; no fixed EMI; principal can be repaid and reused anytime |
| Processing Time | Within 10 minutes after completing digital onboarding |
| Partner Lender | DSP Finance |
| Availability | Accessible via the PhonePe app for verified users |
This is not a fixed-term loan with monthly EMIs, but rather a flexible credit line that users can draw from and repay as needed, much like a secured overdraft.
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PhonePe’s LAMF a Smart Move for Investors
PhonePe’s LAMF offering is designed for savvy investors who want access to funds without disrupting their portfolio. It aligns well with India’s growing digital-first, investment-savvy population.
Top Advantages
- No Redemption Needed: Your mutual fund units are only pledged, not sold—so they remain invested.
- Instant Liquidity: Great for urgent needs, education, healthcare, business, or big purchases.
- Interest-Only Payments: You only pay interest on the amount drawn, not the total limit.
- Flexibility: Repay principal at any time and reuse the limit as needed.
- No Credit Score Barrier: Unlike personal loans, eligibility depends more on MF holdings than CIBIL score.
- Digital and Effortless: No physical paperwork, branch visits, or manual approvals.
Suggested Read: PhonePe Personal Loan
Steps to Avail a Loan Against Mutual Funds on PhonePe
Here’s how you can avail a loan against your mutual fund investments using the PhonePe app:
- Open the PhonePe App and go to the “Loans” section.
- Tap on “Loan Against Mutual Fund”.
- Enter your PAN and OTP to fetch your mutual fund portfolio.
- View your eligible mutual fund schemes and sanctioned loan amount.
- Choose the loan amount you wish to withdraw.
- Complete a KYC verification and set up AutoPay for interest payments.
- Digitally pledge the MF units and sign the agreement.
- The funds are credited to your account within 10 minutes.
Who Should Use PhonePe’s LAMF Product?
This product is tailored for a wide range of investors:
- Retail investors with large mutual fund portfolios who don’t want to redeem early.
- Business owners seeking short-term capital without disturbing long-term investments.
- Students or parents needing immediate funds for education or relocation.
- Home buyers or renovators looking for bridge finance before selling another asset.
- Tax-conscious investors are avoiding capital gains from mutual fund redemptions.
- It also suits those who are financially disciplined and prefer low-cost liquidity options over unsecured loans with high interest.
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How PhonePe’s LAMF Compares to Traditional Personal Loans
The table below shows the comparison of PhonePe’s LAMF and a traditional personal loan:
| Feature | PhonePe LAMF | Personal Loans |
| Collateral Requirement | Yes (Mutual Funds) | No |
| Disbursement Time | Within 10 minutes | 1–3 business days |
| Interest Rate Type | On the drawn amount only | On total sanctioned amount |
| Monthly EMI Required | No | Yes |
| Credit Score Dependence | Minimal | High |
| Prepayment Penalty | None | Often applicable |
| Flexibility | High (reusable limit) | Low (fixed schedule) |
| Digital Convenience | Fully digital | Partially digital or offline |
Conclusion
PhonePe’s Loan Against Mutual Funds product is a well-timed innovation that serves a growing need in the Indian financial landscape: access to credit without disturbing your long-term investments. With instant approval, flexible repayment, and seamless user experience, it empowers users with financial agility and peace of mind.
Whether you’re an investor, entrepreneur, or someone dealing with short-term cash flow needs, this offering brings together the best of liquidity, convenience, and investment continuity, all within your favorite payments app.
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