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Fixed deposits are one of the safest and risk-free investments you can choose. Among the many benefits these instruments offer is the availability of a loan against FD. 

 

A loan against fixed deposit can be a great choice during a cash crunch, especially during an emergency. The easy accessibility of funds and a simple process with minimal documentation are some of the reasons behind this. 

 

Read on to get a better understanding of availing a loan against deposit, the benefits of loan against FD and various other features.

What is Loan against Fixed Deposits (FD)

A loan against FD is a type of loan where you pledge your fixed deposit as collateral. This means your FD acts as security for the loan. When you are in need, make use of your issuer’s overdraft facility against your deposited money as a loan. 

 

Like other credit facilities, you can avail the loan against the deposit amount as a lump sum. You can repay the loan amount in equated monthly instalments or EMIs. Depending on the lender, you can get up to 90% of your fixed deposit amount as a loan. 

 

The terms and conditions, including the loan’s interest rate and repayment tenor, vary from lender to lender. When banks give a loan on fixed deposit, they charge up to 3% higher rates than the existing FD interest rate. 

 

Simply put, when you avail a loan against FD, the interest rate you pay is higher than the prevailing interest rate on your fixed deposit. For instance, if the interest rate on your deposit is 7% then you can expect the loan’s interest rate to be 9-10%.

 

You can apply for a loan against FD online too. However, issuers may place a cap on such loans. When you need an amount higher than what is available online, visit the nearest branch of your FD issuer.

 

Opting for this loan facility is a better option than prematurely withdrawing your FD. This is because premature FD withdrawals attract a penalty that can go up to 1% of the interest rate. 

 

Say you have an FD of ₹15 Lakhs and the interest rate on your FD is 8%. If you make a premature withdrawal, you will only earn 7% and not 8%. Given the deposit amount, this can be a significant loss in earnings, which you can avoid with a loan against fixed deposit.

 

In most cases, a loan against FD is more economical than paying the penalty, especially if you can prepay it. When you are not sure whether you can repay the EMIs on time, it is better to liquidate the FD. Keep in mind that any default can impact your credit score. 

 

For assessing your monthly repayment amount, you can use the online FD calculator on the Bajaj Markets website. This way, you can get a rough estimate of your EMIs and gauge if the loan is the right option for you.

Who Can Apply for a Loan Against FD

Having a fixed deposit with the bank or financial institution from where you want to avail a loan is the first step. Only the entities mentioned below are eligible for this loan:

 

  • Resident Indian citizens

  • Individuals and joint fixed deposit account holders

  • Hindu Undivided Family

  • Family trusts

  • Sole proprietorships, partnership firms, and group companies

  • Clubs, associations, and societies

Here is an additional list to check your eligibility for a loan against fixed deposit:

 

  • An FD in the name of a minor does not qualify

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

How to Apply for a Loan Against FD Online

With digital advancements, you can invest in an FD online and take a loan against it. Here are the steps on how to avail an online loan against FD:

 

  • Log in to the issuer’s website

  • Visit the ‘Fixed Deposit’ section

  • Select ‘Overdraft Facility against FD

  • Provide relevant details like the required loan amount, tenor, and more

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

What are the Documents Required for a Loan Against Fixed Deposit?

Submit the following documents when applying for this loan facility:

 

  • Signed application for loan against fixed deposit

  • FD receipt discharged in favour of the lender

  • Standing instruction to the bank, if any

While these documents are the most important, there may be minor variations depending on the lender. Check with your issuer before applying to ensure that you have all the needed documents to get access to funds easily.

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 liquidate your FD during emergency

No need of a credit score to avail the loan

Applicable on both domestic and NRI FDs

Minimal documentation

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

Before you avail this loan, understand the terms and conditions, such as interest rates, processing charges, repayment tenor and more. This will enable you to make a decision that is good for your current and future finances. 

 

The tables below include essential details regarding the loan against FD from different issuers. 

  • Loan against deposit details from leading banks in India:

Bank

Loan Amount

Interest Rate

Processing Charges

Repayment Tenor

ICICI Bank

Up to 90% of the FD value

At the bank’s discretion

NIL

Remaining tenor of FD

State Bank of India

Up to 85% of the FD value

At the 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 the bank’s discretion

NIL

Remaining tenor of FD

This information is subject to change at the discretion of the banks.

  • Loan against deposit details from leading NBFCs India:

NBFC

Loan Amount

Interest Rate

Processing Charges

Repayment Tenor

Bajaj Finance FD

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

2% more than the prevailing interest rates

NIL

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

PNB Housing Finance FD

Up to 75% of the total principal deposit

2% higher than the maximum fixed deposit interest rate

NIL

Remaining tenor of FD

The information is subject to change at the discretion of the NBFCs.

 

Availing a loan against FD is simple. All you need to do is go over the loan details thoroughly before making any decision. There are also a few disadvantages of taking a loan against fixed deposits such as higher interest rates than regular loans. So, carefully assess the pros and cons before availing a loan against FD to keep your finances secure.

What is an Overdraft Facility?

A loan against fixed deposit is offered as an overdraft facility. Banks provide this credit facility to help you withdraw funds during emergencies.

 

However, note that you are charged a higher interest rate than the existing rate on your deposit when you avail the loan. This interest rate is only charged for the amount you have withdrawn, and not the entire overdraft limit.

Repayment of Loan Against FD

Repaying this loan is a simple process, either as a lump sum or in instalments. This entirely depends on your financial obligations. However, ensure to repay the loan before the FD matures.

 

In case you default, the bank or NBFC has the authority to liquidate your FD to recover the balance. The repayment terms are also at the discretion of the issuer. This is why it is essential that you carefully assess the terms and conditions of your loan against FD. 

FAQs

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

    Yes, senior citizens can apply for this loan facility.

  • ✔️What are the charges to be paid when availing this loan?

    No charges are to be paid when availing this facility. However, your repayment amount will consist of an interest amount, which acts as the payment for availing the facility.

  • ✔️Can I avail loan against FD using online banking?

    Depending on your FD issuer, you may avail an online loan against FD.

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

    You can get up to 95% of your FD amount as a loan. Since this varies from one issuer to another, you can check with your issuer before availing this facility.

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

    These loans typically have a repayment period of up to 60 months or until the end of your investment tenor.

  • ✔️What is a loan against FD interest rate?

    The interest rate for availing a loan against FD will be at your bank’s discretion. It is generally up to 3% more than the prevailing FD interest rates.

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

    When you use an online loan calculator, you can get an estimate of the EMI amount and interest amount for various tenors. This can help you assess whether it is feasible for you to avail the loan.

  • ✔️Can I get a loan against FD?

    Yes, you can get a loan provided you meet the eligibility criteria. You also need an FD account with the issuer from whom you want to avail the loan.

  • ✔️Is it better to break an FD or take a loan?

    Ideally, taking the loan is a better idea if you can repay it easily as your investment remains intact. Breaking an FD can attract penalties that may cause a monetary loss.

  • ✔️What happens if I am unable to repay my loan against FD?

    In case of loan defaults, banks have the authority to use the FD amount to adjust your outstanding loan.

  • ✔️Can minors avail this loan?

    No. Minors cannot avail a loan against FD as you need to be at least 18 years old before you can apply for a loan.

  • ✔️Is it possible to close my FD before completing the loan tenor?

    You cannot close your deposit if there is an outstanding overdraft lien marked on it.