When financial emergencies strike, breaking your savings is not always the best option. A loan against fixed deposit (FD) offers a smarter alternative allowing you to borrow funds by pledging your existing FD as collateral. This way, you get instant liquidity while your deposit continues to earn interest. It is a convenient and cost-effective solution for individuals who need funds quickly whether for medical expenses, business needs, or any short-term cash requirement. With minimal paperwork, quick approvals, and competitive interest rates, a loan against fixed deposit helps you stay financially prepared without sacrificing your hard-earned savings.
Need urgent funds without touching your savings? Get a loan against fixed deposit and access liquidity within hours.
What are the features of loan against fixed deposit?
Below are the features of loan against fixed deposit.
1. Interest rates and charges
One of the biggest advantages of taking a loan on fixed deposit is the lower interest rate. Since your FD acts as collateral, lenders usually charge just 2% higher than your FD’s interest rate making it far cheaper than a unsecured loan. However, it is wise to compare different lenders and understand the full cost of borrowing. Look out for:
- Processing fees: Usually minimal, but check before applying.
- Prepayment charges: Some lenders allow early repayment without extra cost.
- Penalty clauses: Late payments can lead to penalties or impact your FD earnings.
Being aware of these charges ensures you get the most affordable loan against FD while keeping your deposit safe.
2. Loan tenure
You can choose a tenure that suits your repayment comfort. Most lenders offer flexible terms starting from one month up to the FD’s maturity date. Short-term loans are great for quick cash needs, while longer tenures provide lower EMIs and breathing space for repayment. Just ensure your loan doesn’t extend beyond your deposit’s maturity.
3. Loan amount eligibility
The amount you can borrow depends on the value of your fixed deposit. Generally, lenders allow you to get up to 75% of your FD amount as a loan. Eligibility is simple any individual, HUF, or partnership firm with an existing fixed deposit can apply, provided the FD is at least a few months old. However, loans against FDs held by minors, or those already pledged or under lien, are not permitted. For online applications, the process is almost paperless no additional documents are needed if your FD is with the same institution.
4. Risk of default
Although your FD secures the loan, defaulting on repayments can have serious consequences. If you fail to repay on time, the lender can liquidate your fixed deposit to recover the dues. To avoid this, borrow only what you can comfortably repay. Remember, the goal is to meet your short-term needs while keeping your long-term savings intact.
