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Fixed deposits are one of the safest and risk-free investments among the financial products available. In case of emergencies, you can easily avail of a loan against FD to meet your needs. The concept of taking a loan against a fixed deposit may not be that popular but it’s a great choice when you are in need of money as it’s easy to avail and requires little to no documentation.

 

Let us understand the simplified idea of loan against deposit, the benefits of loan against FD and much more here.

What is Loan against Fixed Deposits (FD)

Loan against FD is a type of loan where your fixed deposit is held as collateral. To put it simply, you pledge it as security for a loan. When you are in need, you can take the overdraft against your deposited money as a loan from the bank.

 

Like any other loan, the loan against FD is paid to the borrower in a single shot and repaid by the borrower as equated monthly instalments. Your loan amount can go up to 70% to 90% of the deposit money and it depends on the lender. The terms and conditions including rate of interest, repayment tenor varies from lender to lender.

 

When the banks give a loan against FD, they charge 2 - 3 percent higher rates than the existing FD interest rate. Suppose the interest rate of the FD opened by the depositor is 7%, then the interest rate on loan against FD would be 9-10%.

 

You can apply for a loan against FD online too. However, the banks also have a cap on such loans. If you need an amount higher than the one available online, you should visit the nearest bank branch.

 

The facility of loan on FD acts like a solution to the losses you will face when you withdraw FD prematurely. Suppose you have an FD of Rs. 15 Lakhs in a bank and you are in need of Rs. 5 Lakhs. Instead of liquidating an FD, a loan against the FD would be a better option. This is to avoid the penalty on the premature withdrawal of an FD.

 

In majority of the cases, a loan against FD would be more economical rather than paying the penalty, especially when the borrower can prepay it. But if you are not sure whether you would repay the EMI on time, it is better to liquidate the FD. Please note that any default can impact your credit score. Moreover, you can also use our loan against FD calculator to make comprehensive estimates.

Who Can Apply for a Loan Against FD

The basic criteria to get a loan against FD is holding a fixed deposit with the bank/financial institution you’re seeking a loan from. However, you should also be one of the following:

 

  • Resident Indian citizens

  • Hindu undivided family

  • Family trusts

  • Sole proprietorships, partnership firms, and group companies

  • Clubs, associations, and societies

Here’s an additional list to determine if you can apply for a loan against fixed deposits:

 

  • Individual as well as joint fixed deposit account holders

  • FD in the name of a minor does not qualify

  • 5-year tax-saving FD account holders cannot opt for this type of loan

Features and Benefits of a Loan against FD

Features

Benefits

  • Low-Interest Rates

  • No Prepayment Charges

  • Flexible Loan Repayment Period

  • Seamless Application Process

  • Zero Processing Fee & No Need to Break Your Deposit

  • No Need of Credit Score

  • Available for Both Domestic and NRI FDs

  • Near to Zero Documentation

Things to Keep in Mind Before Applying for a Loan Against FD

Here are some of the important features of loan against FD offered by different lenders. You can get an idea about a range of information through this table including interest rate on loan against FD, processing charges, etc. This table will help you understand details such as loan against FD interest rate and repayment tenor. Additionally, you can also use a loan against FD calculator to determine your returns.

Bank

Loan Amount

Interest Rate

Processing Charges

Repayment Tenor

ICICI Bank

Up to 90% of the FD value

At bank’s discretion

NIL

Remaining tenor of FD

State Bank of India

Up to 85% of the FD value

At bank’s discretion

NIL

Remaining tenor of FD

Yes Bank

Up to 90% of the FD value

1% higher than the maximum fixed deposit interest rate

NIL

Remaining tenor of FD

Axis Bank

Up to 85% of the FD value

2% higher than the prevailing interest rates

NIL

Remaining tenor of FD

Union Bank

Up to 90% - 95% of the FD amount

2 -3% higher than the prevailing interest rates

 

NIL

Remaining tenor of FD

RBL Bank

Up to 90% of the FD amount

2 -3% higher than the prevailing interest rates

 

NIL

Remaining tenor of FD

Citi Bank

Up to 90% of the FD value

At bank’s discretion

NIL

Remaining tenor of FD

As you can see, taking a loan against FD is simple and easy. However, there are disadvantages of taking a loan against fixed deposit , such as higher interest rates compared to regular loans.

 

This following table provides information such as loan against FD interest rate and repayment tenor for leading NBFCs in India.

NBFC

Loan Amount

Interest Rate

Processing Charges

Repayment Tenor

Bajaj Finance

Up to 75% of the deposit amount for cumulative FD and up to 60% of the deposit amount for non-cumulative FD

2% more than the prevailing interest rates

NIL

3 months from the day of investment to the remaining tenor of FD

PNB Housing Finance

Up to 75% of the total principal deposit

2% higher than the maximum fixed deposit interest rate

NIL

Remaining tenor of FD

How to Apply for a Loan Against FD Online

  • Log in to your desired financial institution’s website.

  • Go to the ‘Fixed Deposit’ section.

  • Select ‘Overdraft Facility against FD’.

  • Provide relevant details like the required loan amount, tenor, etc.

  • Since it is an online process, you’ll receive notifications regarding your loan application via SMS or email.

FAQs

  • ✔️Can senior citizens apply for a loan against FD?

    Yes, senior citizens can apply for a loan against FD.

  • ✔️What are the charges to be paid against loan against fixed deposit?

    No charges are to be paid when availing a loan against fixed deposit.

  • ✔️Can one avail loan against FD using internet banking?

    Depending on your banking provider, you may avail loan against FD. 

  • ✔️Which documents are required for the application of a loan against FD?

    To apply for a loan against FD, you need to submit some or all of these documents: application form, FD receipt and a cancelled cheque. 

  • ✔️How much loan can one get against their FD?

    You can get up to 95% of your FD amount as a loan. Additionally, you can check out the loan against FD interest rate .

  • ✔️What is the tenor within which the loan taken against FD should be repaid?

    These kinds of loans typically have a repayment period of up to 60 months. 

  • ✔️What is a loan against FD interest rate?

    The loan against FD interest rate will be charged at your bank’s discretion or will be 1-2% more than prevailing interest rates. 

  • ✔️What is the use of a loan against FD calculator ?

    A loan against FD calculator will help you determine loan against FD interest rate and other details.