Can I Take A Personal Loan To Invest In Mutual Funds?

Obtaining a personal loan to make an investment is known as leveraging. Get to know the reasons to take personal loan for mutual fund investment. Read Now!

31 Oct,2022 11:33 IST 18 views
Can I Take A Personal Loan To Invest In Mutual Funds?

Getting a personal loan today is straightforward owing to a completely digital application process implemented by financial institutions. It also ensures ready-to-use funds in a short while. Moreover, a personal loan is unsecured, i.e., you don’t need to pledge collateral. It is one of the most popular loan types to meet financial needs of diverse nature.

Some people take personal loans to invest in the equity market to generate higher returns in a shorter time. But is taking a personal loan to invest in mutual funds a good idea? This article answers this question in detail.

Why Do Investors Consider Taking A Personal Loan For Investments?

• No Limitations On End Use

Many loans have a predetermined use. However, you can use a personal loan for any purpose. For example, if you apply for a car loan, you can only use it to buy a car. With personal loans, you can use the loan amount for almost anything as long as the law allows. Some of these uses include your child's education or wedding, home renovation, and buying an expensive item, among others

• Loan Without Security

Personal loans don't require any collateral to qualify. Therefore, if you can't repay the loan, you won't risk losing those assets. For instance, if you take out a loan against property, the lender will have the legal right to sell your property to recover the debt. In personal loans, your primary eligibility factor is your credit score.

• Seamless and Quick Procedure

Financial crunches appear unforeseen. In such situations, a personal loan can generate the required liquidity quickly and easily. Other loan types necessitate the evaluation of a financial instrument or the valuation of real estate, which can be time-consuming and cause a delay in the loan application process.

What Motivates Investors To Take A Personal Loan For Investments?

Investments are the ideal avenue to achieve various financial goals, such as buying a house or a car, paying for your education or simply building a corpus. However, you may not have the necessary funds to invest to achieve these milestones. Therefore, investors consider taking a personal loan to leverage investment opportunities such as stocks, mutual funds, and more. However, it is not the best idea to take a loan to invest unless it is to build an asset that’s not market-linked.

When Is It A Wise Decision To Use A Personal Loan For Investments?

It is never a wise decision to use a personal loan for investments. Numerous non-banking financial corporations (NBFCs) actively promote taking personal loans, claiming that doing so is the best way to raise capital. However, you need to ensure your investments return an amount equivalent to the interest incurred in taking a personal loan. If not, you increase your risk of losses, adding to your debt burden. Therefore, before considering taking a personal loan to invest in mutual funds or any other investment avenue, ask yourself:

• Are you sure that your chosen investments are sound?
• Does your ROI outweigh the cost of the loan?
• Have you assessed the risk and its effects on your financial situation?
• Is your backup plan in place?

If you are confident that your investment choices will yield high returns than the personal loan payments and involve fewer risks, then only you should consider taking out a personal loan for investments.

Get Your Personal Loan With IIFL Finance

Personal loans are ideal for financial emergencies. However, you must reconsider your decision to take a personal loan for investments unless you’re 100% sure. If you want a mutual fund personal loan, IIFL Finance can be your best option. You can apply for the loan online, which facilitates swift and secure personal loan sanctioning. You can access easy personal loans with minimum paperwork, low-interest rates, and flexible repayment schedules with IIFL Finance.


Q1. Can personal loans be used to buy stocks?
Ans. Personal loans are useful for various things, including stock purchases. However, taking out a personal loan to invest in the stock market is perilous.

Q.2: How much time does it take to disburse the loan amount by IIFL Finance?
Ans: The lender disburses the loan amount within 24 hours into the borrower's bank account.

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