Loan Against Fixed Deposit

If you are looking for a secured loan that you can avail quickly,  the best option is a loan against FD or loan against fixed deposit.

What is a Loan Against Fixed Deposit (FD)?

A fixed deposit or FD is a popular avenue for saving and investing due to the risk-free nature of the investment. But did you know that an FD can work as security against which you can draw a loan? 

To avail a loan against a fixed deposit, you will need to pledge the FD with the bank/financial institution and get the loan against the safety of the deposit

Who is Eligible for a Loan Against FD?

Any person who has a fixed deposit either individually or through a joint account can get a loan against the FD in question. However, the only categories of fixed deposits that cannot be used as security are -

1. Fixed Deposits in the name of a minor

2. 5 yr Tax Saver Fixed Deposits

How to Get a Loan Against FD?

The procedure to avail a loan against FD is very simple as given below -

• All you need to do is approach the bank where you have a fixed deposit and ask for a loan against the same

• The fixed deposit will be pledged with the bank for the duration of the loan. The good news is that the deposit will continue to earn the same rate of interest as before

• This loan will be allowed as a one-time withdrawal or through an overdraft facility.

Percentage of Loan that Can be Availed Against the FD

When it comes to a loan against FD, the amount is linked to the value of the FD.

In most cases, up to 90% of the deposit amount is allowed as a loan. For example, iIf your FD is worth Rs. 1,00,000, your loan will be approved for Rs 90,000. 

However, this will also depend on other factors such as your relationship with the lender. The loan amount is determined at the sole discretion of the lender.

Loan Against FD Interest Rates

The interest on these loans is calculated at 1-2% above the FD Interest rate. Suppose the interest rate on your FD is 7.5%, the interest rate on the loan would be in the range of 8.5-9.5%

However, as mentioned previously, the loan amount and the interest charged are determined at the sole discretion of the lender.

Top Banks that offer Loans Against FD & their Interest Rates

Most banks offer loans against fixed deposits. Let’s explore the interest rates and other terms and conditions offered by some of the popular banks -

Benefits of Loan Against FD

There are many benefits of availing a loan against fixed deposit. The most important ones being -

• • Interest rates are lower than those on personal loans

  • Approved even for applicants with low or no credit score

  • No need to liquidate the investment to meet financial obligations

  • Quick disbursal of loan

  • Easier to repay

  • Can be easily availed by senior citizens as well

  • Loan can be repaid and closed any time as there is no prepayment penalty

  • Most banks do not charge processing fees for this loan