Loan Against Fixed Deposit, Loan Against FD Interest Rate

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

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 -

Bank Name	Minimum FD Amount	Interest Charged	% of FD allowed as loan	Available as
Axis Bank	Rs 25,000	2% above FD rate	85%	Overdraft Facility
SBI	Rs 25,000	1% above FD interest rate	85%	Overdraft Facility or Demand Loan
HDFC Bank	Rs 25,000	2% above FD rate	90%	Overdraft Facility
ICICI Bank	NA	NA	90%	Demand Loan or Overdraft Facility
Yes Bank	Rs 10,000	1% above FD rate	90%	Overdraft Facility
Punjab National Bank	N/A	Subject to Repo Linked Lending Rate	80%-95% depending upon the tenure of the loan	Overdraft Facility

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

Disadvantages of Loan Against FD

While there are a number of benefits offered, here are some loan against FD disadvantages -

The loan amount will be determined and limited by the amount in your FD
The loan term cannot be greater than the term of the FD
In case you are unable to repay, the bank can foreclose the FD to recover the loan amount
Defaulting on the loan against FD can impact your credit score as well

Loan Against Fixed Deposit