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Can SIP investments be pledged for a loan?
Yes, SIP (Systematic Investment Plan) investments can be pledged for a loan, but with certain conditions. SIPs are a method of investing in mutual funds, and over time, the units accumulated through SIPs can be used as collateral. Financial institutions allow investors to take a loan against mutual funds, including those accumulated via SIPs, by pledging the mutual fund units held in their demat account or folio.
The process involves approaching a lender who offers loans against securities, filling out the necessary application, and pledging your mutual fund units. Once the lender approves the request, a loan amount is sanctioned based on the value of the pledged units and the applicable Loan-to-Value (LTV) ratio. It’s important to note that the SIP itself doesn’t stop—you can continue investing while using your existing units as collateral.
This facility offers a convenient way to access funds without redeeming your investments, making it a popular option for short-term financial needs.
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