In recent times, the popularity of mutual funds has been increasing at astonishing speed. Numerous people are investing their hard-earned money in mutual funds and slowly but steadily, mutual funds are making place in the hearts of masses. They are absolutely easy to use and even people with little or no knowledge can make big money.
Bank Offers Two Type Of Loans:
- Cash credit loan.
- Overdraft loan.
Only Business get cash credit loan when they need cash for inventories to run their business efficiently. Cash credit loans are not for Individuals. Cash credit are short term loan offer by bank to businesses for capital requirement to manage their cash cycle.
While in Overdraft , there is no hard and fast rule, both businesses and even individuals with good CIBIL score is eligible for overdraft loan. This is why it is very important to improve your CIBIL score. One can get overdraft loan on Mutual funds and Fixed deposits as well.
Examples
For example: if one took FD of Rs.5 lacs then one can get up to 85% overdraft loan on it. But in case of Equity mutual fund one can get upto 50-60 % of NAV (Net Asset Value).
In overdraft loan, you don’t need to create separate account as you get loans through current account and fixed deposits.
But interest rate for Overdraft loans are generally high for current account compare to savings account. These types of loans are also considered as unverified loan. In case of defaults, Bank recover their money from individuals through securities and from businesses through inventories.
The best part of investing money in mutual funds is the professional management of investments. Generally, fund managers run mutual funds and watch investments on daily basis. It is very difficult to get such a level of money management at any other place.
Secondly, mutual funds are popular for their ability of liquidation. At any given day, an individual can sell his/her shares and there will be no issues against such a behavior. One can compare the time taken for the liquidation of stocks as compared to that of mutual funds. This benefits investors in many instances.
For instance, if an investor has shares in mutual funds and wants to sell them due to impending losses, then he can sell them without any hassles and save himself from undergoing losses, which is not the case in other investment options.
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