Fixed Deposits as loan collateral: Benefits and process

Secure loans easily by using fixed deposits as collateral. Enjoy low-interest rates and fast approval process. Explore this option now!
FD as loan collateral
3 min

During a financial emergency, we often look at different credit prospects, such as personal loans and credit cards, to meet our needs. However, these credit sources often come with a high APR, hard credit inquiries, and more. Loans against FDs are one of the most cost-effective, time-efficient, and easiest funding sources available in the market. Leveraging your fixed deposit as collateral can help you raise funds at lower interest rates without credit checks, lengthy paperwork, processing fees, or long waiting periods.

Also Read: Senior Citizen FD Rates

What are loans against FD

A loan against a fixed deposit is a type of secured loan offered by financial institutions like banks and NBFCs. If you have an FD account with the lender, you can borrow money using your fixed deposit as collateral. Typically, you can borrow up to 90% of the FD value. However, the exact percentage varies depending on the lender’s policies. The collateral fixed deposit pledge for the loan acts as security, lowering the risks associated with the loan. Thus, lenders tend to offer more competitive interest rates on such secured loans, making them pocket-friendly finance options for FD holders.

Eligibility for a loan against FD

The eligibility criteria for using fixed deposits as collateral is pretty simple. Firstly, you should have an FD account with the financial institution from which you are availing the loan. Some banks may stipulate that fixed deposits be held for a minimum period before they can be used as collateral for loans. The following common eligibility parameters are also applicable:

  • The applicant should be a resident Indian
  • The applicant must be above 18 years of age

Some banks offer loans against FDs to both individual and joint account holders. However, FD accounts held in the name of minors and 5-year tax-saving FDs do not qualify for such loans. It is recommended to check with your lender before using your fixed deposit as collateral since eligibility criteria vary depending on the bank or financial institution.

Also read: FD rates for 1 year

Benefits of loans against FD

Loans against FDs offer borrowers the following benefits:

  • Low interest rates: As secured loans, loans against FDs are much cheaper than other types of loans like personal loans. For most banks, interest rates on loans against FDs stand at 0.5%-2.0%[1]  higher than the FD interest rate.
  • No need to break the FD: Using your fixed deposit as collateral for a loan allows you to raise liquidity without breaking your FD account. You do not have to opt for premature withdrawals and suffer a loss of interest earnings on the FD.
  • Favourable loan terms: The tenure of such loans is the same as the tenure for your fixed deposit account. You can repay the loan amount, plus the accrued interest on the sum, at the end of the term. If you cannot repay the loan amount, the lender adjusts the outstanding amount with maturity proceeds from the FD. Additionally, most lenders do not levy a foreclosure charge for such loans.
  • Easy application process: The application process for a loan against a fixed deposit account is quite simple. Most lenders require minimum documentation for loan approval since they already have your KYC details stored as a registered customer. Several banks now offer overdraft FD loans online via their net banking platforms.
  • Quick access to funds: During emergencies, a quick access to funds is needed. Personal loans can take a few days to be processed and disbursed. However, a loan against a fixed deposit can offer you quick and easy access to the required funds. Most lenders offer such loans against minimum formalities since it is a secured loan.
  • No credit checks: Using a collateral fixed deposit makes your loan a secured one. This eliminates the need for usual credit checks lenders perform to determine the applicant’s eligibility. Therefore, obtaining a loan against your fixed deposit account may be the most sensible financing option if you have a poor credit score.

Also read: Fixed Deposit Checklist


A loan against your fixed deposit account is one of the easiest and most pocket-friendly finance options available. If you already have an FD account and require immediate funds at relatively cheaper rates, a loan against your FD corpus is a great option. These loans require minimal paperwork and involve zero processing charges. Leveraging your fixed deposit as collateral for a loan allows you to bypass credit checks and secure instant financing. It is a great way to leverage your investment to gain liquidity and meet emergency expenses.

Bajaj Finance offers instant loans against FDs. You can secure a loan of up to 75% of the principal invested in cumulative FDs and up to 60% in non-cumulative FDs. Thanks to the digitised application process, you can apply for a loan against your FD online in just a few easy steps. Apart from easy loans, you can also watch your savings grow at a high rate of interest of up to 8.85% p.a.

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Frequently asked questions

What are fixed deposits, and how can they be used as collateral for loans?
Fixed deposits are safe investment vehicles in which you can deposit a lump-sum amount for a fixed tenure and earn interest at a pre-given rate. FDs can be pledged as loan collateral to secure immediate and hassle-free funding. Pledging your FD as collateral essentially secures the loan against possible credit risks.
Can I use fixed deposits from any bank as collateral for loans?
No. Generally, you can only apply for a loan against your FD in the bank or financial institution where the FD is held.
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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
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.