India, Oct. 23 -- Pledging mutual fund units means placing a lien on your units so that a lender can use them as security for a loan. The units stay in your name and remain invested, but you cannot sell or switch them until the loan is repaid and the lien is removed.

Many investors reach this point when they need money quickly, and their savings are in mutual funds. Redeeming the units could mean paying capital gains tax and missing out on future growth. Pledging lets you raise money against those units instead. The process is now mostly online and can often be completed within a day or two.

Before going through the steps, it helps to know what changes when your units are pledged.

When you pledge, a "lien" is marked on your units with ...