Effective planning is required to manage your finances and increase your savings. An increase in the standard of living and lifestyle changes can cause a shift in expenditure, which is why liquidity should be managed well. Also, it is possible that you might exhaust a majority of your savings on unforeseen expenses and other emergencies. In such cases, selling your financial assets is a dependable option. Those without financial security can avail a personal loan during circumstances that require immediate funds. A Personal loan can also be borrowed for various other purposes such as meeting marriage-related expenses, paying for children’s education, purchasing, household appliances, going on vacations, renovating your homes and more. Since there’s no financial security mortgaged for a personal loan, the interest rates for such loans are higher compared to other type of loans.
However, you can enjoy a personal loan at a lower interest if you have a fixed deposit in a bank. Personal loan against fixed deposit is provided by many banks. Without breaking the fixed deposit, you can avail a personal loan against FD.
Some advantages of personal loan against FD have been outlined below:
- A personal loan against fixed deposit can be procured easily and is not dependent on your credit score. A fixed deposit is a common investment tool for many due to its overdraft facility. A personal loan does not require security, plus, the fixed deposit can be used as collateral, thereby giving you a chance to enjoy lower interest rates on personal loan.
- Usually, there’s no processing fee for personal against FD. In case some banks charge a processing fee, however it is way lesser compared to other type of bank loans.
- An application for Bajaj Finserv personal loan against FD is processed quickly as there are fewer documents required for existing customers. The loan processing with FD is much more convenient than other loan applications.
- As mentioned earlier, a personal loan can be availed without breaking the FD. Yo can enjoy interest on FD even during the loan tenure.
To avail a personal loan against FD, all you need is a single or joint fixed deposit account in a bank. The bank will sanction the personal loan amount based on the maturity amount of your FD. So, here your FD amount is the deciding factor of your loan amount. The loan tenure will be proportional to the tenure of your FD. But you can always opt for loan tenure shorter than the actual FD tenure. The fixed deposit will be considered as collateral and the interest rate will be 2% to 3% more than the fixed deposit rate. If charged by the bank, processing fee will be 1 percent.
Before applying for a personal loan against fixed deposit, make sure there’s no existing lien on the fixed deposit. Also, minors should not be the account holder of fixed deposit you wish to use against a personal loan. In case of joint fixed deposit, both the account holders will have to process loan documents. Also, both of them share equal responsibility to repay the loan.
Overall, personal loan against fixed deposit is a great tool to raise funds during crisis. But keep in mind that it’s ideal to apply for short-term loans. If you fail to repay the loan amount, the bank forecloses the fixed deposit for loan recovery. Although availing this type of loan is not reliant on a good credit score, your inability to repay the loan will reflect on your credit score. This will showcase on your CIBIL report, which in turn affects your future loan applications, if any.