1 min read
25-June-2025

Fixed deposits (FDs) have long been one of the most trusted savings options. They offer predictable returns, safety of capital, and are perfect for setting aside emergency funds or long-term goals. But what happens when you need urgent money—say, for buying a home or managing a medical emergency? Many end up breaking their FD. But doing so can mean losing hard-earned interest and facing premature withdrawal penalties. A smarter alternative? Take a loan against fixed deposit.

Need funds but do not want to break your FD? Get instant liquidity while your investment keeps growing. Apply for a Loan Against FD

Let us explore how a loan against FD works, why it is often a better choice than a traditional loan, and what you need to know before applying.

Losing returns: What happens when you break your FD?

When you prematurely break your fixed deposit, you not only interrupt the compounding benefits but may also face:

  • Lower interest payouts

  • Premature withdrawal penalties

  • Loss of disciplined savings

And if your FD was tied to a long-term goal like home buying or child’s education, this move could set you back by months, if not years. That is why many smart savers now choose to borrow against their FD instead of dissolving it.

Keep your investment intact and still access funds Secure a loan against your FD without impacting your savings. Get started now

Loan against FD: A better option in urgent situations

Instead of losing out on your returns, a loan against fixed deposit gives you quick access to funds usually up to 75% of your cumulative FD value and around 60% for non-cumulative FDs.

This can be a game-changer when you’re:

  • Buying a house

  • Paying for education

  • Managing unexpected medical costs

  • Expanding a small business

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Nominal interest: A cost-effective borrowing solution

One of the biggest benefits of a loan against FD is the lower interest rate. Usually, the interest charged is just 1% to 2% above your FD’s interest rate. This makes it far more affordable than personal loans or credit cards.

If you have a low credit score or limited income proof, borrowing against an FD is often much easier than taking a regular loan.

Easy application process: Minimal paperwork, faster funds

Since your FD is already with the lender, applying for a loan against it is simple. Most lenders only require a one-page application, and in many cases, funds are disbursed on the same day. Here is what the process generally looks like:

  1. Fill out a short form online or offline

  2. Select the FD you want to pledge

  3. Choose your loan amount and tenure

  4. Get the loan amount credited to your bank account

No lengthy approval cycles. No waiting.

No hidden charges: Transparent and borrower-friendly

Unlike many loan products that come with surprise fees, a loan against fixed deposit typically has:

  • No processing fees

  • No part-prepayment charges

  • No foreclosure penalties

This gives you complete flexibility. You can repay the loan whenever you have extra funds—without worrying about extra costs.

Continued returns: Your FD keeps earning interest

One of the best parts of taking a loan against FD is that your deposit continues to earn interest throughout the loan period. You don’t lose out on the growth of your money while managing your short-term cash crunch. It is like putting your money to work in two places at once.

Things to remember when opting for a loan against FD

While this is a great borrowing tool, here are a few things to keep in mind:

  • Your loan tenure will not exceed your FD tenure.

  • In case of default, the lender can recover dues by liquidating the FD.

  • You might not get income tax benefits that are available on some other loan types.

Plan your loan wisely and choose a repayment schedule that matches your cash flow.

Who should consider a loan against FD?

A loan against fixed deposit is ideal for:

  • Salaried individuals needing quick liquidity

  • Senior citizens with large FDs

  • Small business owners seeking working capital

  • Students or parents managing sudden education costs

  • Anyone who wants funds without disturbing their long-term savings

Is loan against FD better than a personal loan?

Here’s how the two options compare:

Criteria

Loan against fd

Personal loan

Interest rate

Lower (FD rate + 1-2%)

Higher (10%-20% avg.)

Documentation

Minimal

Extensive

Processing time

Instant or 24 hours

2–5 days

Risk to Investment

FD remains intact

No linked investment

Prepayment charges

Usually none

May be applicable


If you already have an FD and need a short-term loan, borrowing against it is usually the smarter move.

How to apply for a loan against fixed deposit

Here’s a quick step-by-step guide:

  1. Visit your FD provider’s website or branch

  2. Choose the FD you want to pledge

  3. Fill in a short application form

  4. Select the loan amount and duration

  5. Submit the application and wait for disbursal

Most lenders credit the loan amount directly to your account within hours.

Conclusion

Breaking your FD should never be your first option when you need urgent funds. With a loan against fixed deposit, you get the financial flexibility you need—without compromising your savings. It is simple, quick, and low-cost. Whether you're buying a home, funding a business, or handling an emergency, this type of loan can help you stay on track financially.

Do not touch your FD tap into its value instead. Get fast funds while your FD continues to grow. Apply for Loan Against FD

Frequently asked questions

Can I get a Home Loan against a fixed deposit?

Yes you can get a home loan against fixed deposit. It offers you a fast and straightforward financing solution without eliminating your investment. It is most preferred when you need funds to match the cost of a new home.

Is it advisable to take a loan against FD?

Taking a loan against your Fixed Deposit (FD) can be a convenient financial solution for short-term needs. It offers lower interest rates compared to personal loans, avoids premature withdrawal penalties, and involves a simpler process. However, it's crucial to consider factors like loan amount limits, interest rate fluctuations, and the impact on your emergency fund. Ensure the loan is for genuine needs and not luxury purchases.

Can we take a Loan Against FD for constructing a flat?

Yes, you can take a loan against your Fixed Deposit (FD) to finance the construction of a flat. However, it's important to consider that the loan amount is typically limited to a certain percentage of your FD value. However, it's crucial to consider factors like loan amount limits, interest rate fluctuations, and the impact on your emergency fund.

Is it wise to take a loan against FD?

Taking a loan against your Fixed Deposit (FD) can be a wise financial decision in certain situations. It offers several advantages, including lower interest rates compared to personal loans, no premature withdrawal penalty, quicker disbursal, simpler documentation, and flexible repayment options. This makes it a suitable choice for short-term financial needs like medical emergencies, home renovations, or bridging a temporary cash flow gap. However, it's crucial to consider factors like loan amount limits and interest rate fluctuations before making a decision.

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Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.