Loan against Mutual Fund Investments

1 Banks and finance companies offer loans against investments such as shares, bonds and mutual funds.

2 The amount given as loan will be lower than the market value of the units held by the borrower. This is called the haircut or margin.

3 Liquid funds and debt funds have a lower margin; equity and balance funds have a higher margin.

4 The rate of interest depends on the tenor of the loan, the credit score of the borrower and the extent of margin charged.

5 The units will be marked as under lien in the books of the mutual fund. The investor cannot sell or redeem the units until the loan is repaid.

6 If the borrower defaults, the lender can evoke the lien and recover the dues. Interest rates are lower on loan against assets due to this security.

Best Tax Saver Mutual Funds for 2016 or Top ELSS Mutual Funds for 2016

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. IDFC Tax Advantage (ELSS) Fund

4. ICICI Prudential Long Term Equity Fund

5. Religare Tax Plan

6. Franklin India TaxShield

7. DSP BlackRock Tax Saver Fund

8. Birla Sun Life Tax Relief 96

9. Reliance Tax Saver (ELSS) Fund

10. HDFC TaxSaver

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