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L O A N A G A I N S T M U T U A L F U N D S · I N D I A C O S T T A B L E S 2 0 2 6 O N E F O R M U L A , F I V E T A B L E S , N O S U R P R I S E S Interest, Worked Out. Interest on a loan against mutual funds is arithmetic, not a mystery. Three inputs decide it, and you control two of them. balance × rate × days ÷ 365 T H E W H O L E C A L C U L A T I O N ₹863 ₹ 1 L A K H , 3 0 D A Y S , 1 0 . 5 % Daily H O W I T A C C R U E S Monthly H O W I T I S B I L L E D T U R N T H E P A G E → 0 1
B E F O R E Y O U B E G I N N O T E T O T H E R E A D E R The rate is not the cost. A rate quoted per year tells you almost nothing about a loan you intend to hold for six weeks. What you pay is that rate applied to the balance you actually owe, for the number of days you actually owe it. That is why the same facility can cost a few hundred rupees or several thousand at the identical rate — and why the days matter more than the percentage. To run your own amount and tenure, this LAMF interest calculator does the same arithmetic as the tables here. W H A T ' S I N S I D E 01 The four inputs that decide the bill 04 What it costs against the alternatives 02 ₹1 lakh, priced by days and rate 05 The four levers you control 03 A real drawdown, day by day 06 Reading a calculator properly HOW TO READ Every figure is simple interest on the drawn balance, rounded to the rupee. Fees are excluded and listed separately. NOT ADVICE General information only, not credit advice. Rates are illustrative; your sanction letter sets the one that applies. I N T E R E S T , W O R K E D O U T 0 2
§ 0 1 · I N P U T S W H A T T H E S U M N E E D S 01 The balance, not the limit Interest applies to what you have drawn, not to what was sanctioned. A ₹5 lakh limit with ₹80,000 drawn is an ₹80,000 loan for costing purposes, and an unused limit contributes nothing to the bill. 02 The rate, expressed per year Quoted annually and applied daily. It is usually floating, set on your profile and the schemes pledged, and can be repriced during the facility's life — so treat today's rate as today's rate. 03 The days you hold it The lever most people ignore and the one with the largest effect. Thirty days at any rate costs roughly a twelfth of a year at that rate, which is why short drawdowns are cheap almost regardless of the percentage. 04 The fees, which sit outside the formula A processing charge at sanction and a renewal charge each year are not interest and do not shrink when you repay early. On a small or short loan they can exceed the interest itself. I N T E R E S T , W O R K E D O U T 0 3
§ 0 2 · T H E T A B L E ₹ 1 L A K H , P R I C E D One lakh drawn, held for a while. Simple interest on a ₹1,00,000 balance, rounded to the rupee. Read down for the rate you have been quoted, across for how long you expect to hold it. I N T E R E S T P A Y A B L E , I N R U P E E S RATE 7 DAYS 30 DAYS 90 DAYS 180 DAYS 1 YEAR 9.0% 173 740 2,219 4,438 9,000 10.5% 201 863 2,589 5,178 10,500 12.0% 230 986 2,959 5,918 12,000 14.0% 268 1,151 3,452 6,904 14,000 T H E S A M E T E N U R E S O N ₹ 5 , 0 0 , 0 0 0 A T 1 0 . 5 % Interest payable 1,007 4,315 12,945 25,890 52,500 The arithmetic is linear, so either table works at your own scale: double the balance and the interest doubles, halve the days and it halves. Nothing compounds while the facility is billed monthly and settled. W H A T T H E T A B L E S H O W S Moving from 9% to 14% — a difference that feels enormous in a brochure — adds about ₹411 on a thirty-day drawdown of a lakh. Holding that same lakh for a year instead of a month adds roughly ₹9,600. The tenure column moves the number far more than the rate row does. I N T E R E S T , W O R K E D O U T 0 4
§ 0 3 · A R E A L D R A W D O W N D A Y B Y D A Y A limit used the way limits are used. A ₹5 lakh facility at 10.5%, drawn twice across six months and repaid both times. PERIOD BALANCE DAYS INTEREST Before the first drawdown 0 28 0 First drawdown 2,00,000 40 2,301 Half repaid early 1,00,000 15 431 Cleared in full 0 19 0 Second drawdown 1,00,000 20 575 Repaid, facility idle 0 60 0 Six months, total interest ₹3,307 The zero rows are the point. For 107 of these 182 days the facility was open, available and costing nothing at all — which is the whole argument for a limit over a loan. T H E C O M P A R I S O N T H A T M A T T E R S The same ₹5 lakh taken as a term loan at 10.5% and held for those six months would have accrued around ₹26,000, because the whole principal would have been outstanding the entire time. Same rate, same collateral, nearly eight times the interest — the difference is entirely in the days and the balance. I N T E R E S T , W O R K E D O U T 0 5
§ 0 4 · A G A I N S T T H E A L T E R N A T I V E S ₹ 1 L A K H , 9 0 D A Y S The same lakh, borrowed five ways. Interest only, over ninety days, at rates typical of each route. Fees differ and are noted separately. C O S T O F ₹ 1 , 0 0 , 0 0 0 F O R 9 0 D A Y S ROUTE TYPICAL RATE INTEREST Against mutual funds 10.5% 2,589 Against gold 11.0% 2,712 Personal loan 16.0% 3,945 Credit card, revolved 40.0% 9,863 Selling units instead No interest Tax + growth Interest is only part of each figure. A personal loan usually carries a processing fee of one to two per cent and may charge for early closure; a card balance compounds monthly and adds charges on any missed minimum; a gold loan needs the metal physically deposited. The route against mutual funds leaves the collateral in your folio, still invested, and charges only for the days you actually owe. T H E L A S T R O W I S T H E I N T E R E S T I N G O N E Redeeming units carries no interest at all, which makes it look free. It is not: gains realised on the sale are taxed, the units stop compounding, and buying back later means buying at a new price. For a short, dated need the interest above is often the smaller of the two costs — for an open-ended one, it rarely is. I N T E R E S T , W O R K E D O U T 0 6
§ 0 5 · L E V E R S W H A T Y O U C O N T R O L B I G G E S T Shorten the days Repaying a month early on a lakh saves more than negotiating a full percentage point off the rate. Set the repayment date on the day you draw, and treat it as fixed. S E C O N D Draw in instalments Taking the whole limit because it is available is the most common way to overpay. Draw what the payment actually needs, when it needs it, and leave the rest as headroom. T H I R D Sweep spare cash against the balance Because interest accrues daily, a part-payment starts saving from the next day. Idle money in a savings account earns less than the balance is costing you. F O U R T H Count the fees before you commit Processing and renewal charges are fixed costs. On a ₹50,000 drawdown held for three weeks, they can be several times the interest — which changes whether the loan is worth taking at all. I N T E R E S T , W O R K E D O U T 0 7
C L O S I N G R E A D I N G A C A L C U L A T O R Four inputs in, one number out. Any interest calculator is doing the arithmetic on page three. What separates a useful answer from a misleading one is what you feed it — and whether the output you read is interest alone or the full cost of the facility. Enter the amount you will draw, not the limit Enter the days you will hold it, honestly Use the rate on your sanction letter, not the advertised one Check whether fees are included in the output Model a longer tenure as well, in case the need slips Compare the total against the tax on selling units ₹863 Thirty days on a lakh at 10.5%. Nine times What the same sum costs as a full-term loan. Zero What an undrawn limit adds to the interest. Interest, Worked Out — a flipbook on the cost of a loan against mutual funds in India, 2026 edition. Written for general understanding only, not credit advice. All figures are illustrative simple interest on the drawn balance, rounded, and exclude processing, renewal and registrar charges; comparison rates are typical market ranges rather than quotes. Your lender's sanction letter and its method of computing interest govern in every case. E N D O F F L I P B O O K 0 8