A loan against fixed deposit (LAFD) involves using your investment as collateral, providing security for the loan. Similar to other credit options, you receive the loan amount as a lump sum, with the flexibility to repay anytime before maturity. Depending on the lender, you may be eligible for a loan amount of up to 75% of your cumulative fixed deposit. In case of non-cumulative FD, you will receive up to 60%.
The terms and conditions, including the loan’s interest rate and repayment tenor, vary across lenders. When banks give such a loan, they charge up to 2% higher rates than the existing FD interest rate.
Opting for this loan facility is a better option than prematurely withdrawing your FD. This is because premature FD withdrawals attract a penalty that ranges from 2-3% of the interest rate.
The entities mentioned below are eligible for this loan:
Resident Indian citizens
Individuals and joint fixed deposit account holders
Hindu Undivided Family (HUF)
Sole proprietorships, partnership firms, and group companies
Clubs, associations, and societies
However, the below types of FDs are not eligible for a loan against fixed deposit:
FD in the name of a minor
You can easily avail of a loan against FD. However, in case of a physical application form, you need to submit the following documents:
Signed application for loan against fixed deposit
FD receipt discharged in favour of the lender
Standing instructions to the bank, if any
There may be minor variations in the documents required depending on the lender. Check with your issuer before applying to ensure that you have all the necessary paperwork handy.
A loan against fixed deposit is offered as an overdraft facility. Banks and NBFCs 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 of the loan. This interest rate is only charged for the amount you have withdrawn, and not the entire overdraft limit.
Repaying this loan is a simple process, either as a lump sum or in monthly 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 recover the balance amount (principal + interest) at the time of FD maturity. 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.
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.
Yes, senior citizens can apply for this loan facility.
No charges are to be paid when availing this facility. However, the repayment amount will consist of an interest amount, which acts as the payment for availing the facility.
Depending on your FD issuer, you may acquire an online loan against FD.
You can get up to 75% of your FD amount as a loan. Since this varies from one issuer to another, you can check with your FD issuer before availing this facility.
These loans typically have a repayment period of up to 60 months or until the end of your investment tenor.
The interest rate for availing a loan against FD will be at your bank’s discretion. It is generally up to 2% more than the prevailing FD interest rates.
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.
Ideally, taking the loan is a better idea if you can repay it easily, keeping your investment intact. Bear in mind that breaking an FD shall attract penalties.
In case of loan defaults, banks have the authority to use the FD amount to adjust your outstanding 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.
You cannot close your deposit if there is an outstanding overdraft lien marked on it.