How to Repay Loan Against FD?

Have you taken a loan against your fixed deposit and are now exploring how to repay it effectively? Repaying this loan is usually simple, flexible, and designed to ensure that your FD continues to earn interest even while it is pledged. However, choosing the best repayment method and understanding the terms can save you money and prevent unexpected charges. Before we understand how to repay a loan against FD, let us briefly revisit what this loan means and how it functions. By doing this, you can choose repayment strategies that align with your financial habits, liquidity needs, and tenure expectations. 

Get low-interest funding through your FD. Apply for a loan against fixed deposit  

A loan against fixed deposit is a secured credit facility offered against your FD, where the bank or financial institution uses your deposit as collateral. Instead of liquidating your FD during emergencies, you can borrow funds, usually up to 75% of your deposit value, depending on the issuer’s policies. 

You continue earning interest on your FD during the loan tenure, which makes it more cost-effective than personal loans. The interest rate is generally lower than unsecured loans because the lender receives security in the form of your fixed deposit. This makes it ideal for short-term, urgent monetary requirements such as medical emergencies, travel, large payments, education costs, and more. 

Unlike traditional loans, a loan against FD usually requires minimal documentation and a quick approval process. Money may be disbursed faster for online accounts, and even foreclosing it does not attract any charges. 

Repaying the loan becomes easier once you understand why this borrowing option works advantageously. Here are the major benefits: 

• Retain your FD and continue earning interest: Your deposit remains intact, and the interest accumulation does not stop during the loan period. 
• Lower interest cost compared to unsecured loans: Since it is a secured loan, the lender charges a lower rate, reducing your repayment burden. 
• Bullet repayment option: Borrowers can choose to pay using bullet repayment option.  
• Quick access to funds without heavy paperwork: Many lenders offer instant approvals, especially if your FD exists with the same institution. 
• Ideal for short-term urgent needs: You avoid premature withdrawal penalties and still enjoy liquidity. 

Make short-term borrowing more affordable with a loan against fixed deposit. Check now 

While learning how to repay loan against FD, it is important to know that repayment is flexible. Lenders usually provide multiple options, allowing borrowers to choose based on cash flow, tenure, and type of expenses. Here are the common repayment methods: 

• Bullet repayment at maturity: Some institutions allow you to repay the entire loan (principal + interest) in one lump sum at the end of the tenure. This is ideal for borrowers expecting large inflows later, such as bonuses or contract payments. 
• Loan adjustment against FD maturity: If you choose not to repay separately, the lender may adjust the principal and pending interest from your FD proceeds at maturity. The remaining FD value (after deductions) gets credited to you. 

Choose flexible repayment options and retain your investment. Get a loan against FD 

Repayment may differ slightly among institutions but follows a broadly similar procedure. Here is a step-by-step guide: 

Step 1: Track your interest due dates 

If you opted for periodic interest payments, ensure timely payments to avoid penalties or FD encashment. 

Step 2: Choose or switch your repayment mode 

Contact your lender if you wish to switch from interest-only to EMI mode or vice versa. 

Step 3: Set up an automatic payment instruction 

Linking your bank account or savings account for auto-debit ensures you never miss a payment. 

Step 4: Foreclose if you can repay early 

Many lenders allow early foreclosure without heavy charges. If you have surplus funds, repay early to save interest costs. 

Step 5: Request a loan closure certificate 

Once repaid, obtain a certificate confirming closure to ensure no dues or lien remain on your FD. 

Even though repayment is simple, keeping note of a few factors can prevent unexpected deductions from your FD. Things to keep in mind  

• Missing interest repayments may lead to FD liquidation: If you fail to pay interest periodically, lenders may deduct it directly from your FD. 
• Top-up requests may increase repayment burden: Borrowing more midway increases interest payable; choose wisely based on need. 
• Foreclosure benefits depend on lender policies: Some lenders may offer zero foreclosure charges, whereas others might levy a small fee. 
• Always maintain account balance for auto-debit: Insufficient funds may lead to penalty charges and affect your credit score. 

Repaying a loan against fixed deposit becomes seamless if you understand your repayment options and choose what suits your financial habits best. Whether you prefer instalments, interest-only payments, bullet repayment, or adjustment against FD maturity, the key lies in planning repayments according to your cash flow. Knowing how to repay loan against FD is essential to ensure your deposit remains secure, continues to grow, and serves your financial goals without disruptions. With a clear repayment strategy, you can not only maintain your deposit but also use it wisely as a reliable source of emergency funding. 

Get convenient funding without breaking your FD. Apply for loan against fixed deposit here