In times of financial need, a loan against a fixed deposit can be an attractive and convenient option. It allows individuals to use their existing fixed deposits as collateral to secure a loan from a financial institution. While this can be a beneficial solution, there are several crucial factors that prospective borrowers must consider before applying for a loan against a fixed deposit.
1. Interest rates and charges
Before committing to a loan against a fixed deposit, it is essential to understand the interest rates and charges associated with it. The interest rate on such loans is generally lower compared to traditional personal loans, as the fixed deposit acts as collateral. However, it is still vital to compare different lenders to ensure you get the most favourable terms. Additionally, be aware of any processing fees or penalties for prepayment, as these can significantly impact the overall cost of the loan.
2. Loan Tenure
Choose from a range of loan tenures, starting from 1
month and extending all the way to your deposit's maturity date.
3. Loan amount eligibility
Bajaj Finance allows you to avail a loan against your fixed deposit after three months from the date of deposit. Eligible applicants include resident individuals (excluding foreign citizens, NRIs, and PIOs), Hindu Undivided Families (HUFs), sole proprietorships, and partnership firms. No documents are required for online LAFD applications. However, LAFD cannot be availed for FDs held by minors, those with attachment/garnishee notices, or those with liens for other loans.
4. Risk of default
While the loan is secured by the fixed deposit, defaulting on repayments can have serious consequences. It can lead to the bank or financial institution liquidating the fixed deposit to recover the outstanding amount. It is crucial to be aware of your repayment capacity and only take a loan that you can comfortably repay.
Documents required for loan against FD
When applying for a loan against your fixed deposit, lenders usually require minimal documentation especially if the FD is already held with them. The process is quick and designed for convenience. Typically, you’ll need the following:
- Loan application form: Duly filled and signed
- Identity proof: PAN card, Aadhaar card, passport, or voter ID
- Address proof: Utility bill, Aadhaar card, or passport
- Fixed deposit certificate: Or account details linked to the FD
- Cancelled cheque: For bank account verification, if required
Do note that specific requirements may vary slightly based on the lender’s internal policies or the loan amount requested.
How to apply for a loan against FD?
Applying for a loan against your fixed deposit is simple and can be done online or offline. Below is a step-by-step process to guide you:
- Visit the lender’s official website or go to the nearest branch.
- Log in to your account or begin a new loan application.
- Select your existing fixed deposit from the available options.
- Enter the desired loan amount and choose a suitable repayment tenure.
- Upload the required documents like ID proof, address proof, and FD details.
- Review and submit your application for processing.
- Wait for verification and approval.
- Once approved, the loan amount will be disbursed directly to your bank account usually within 24-48 hours*.
The entire process is designed to be quick, especially for existing FD holders.
Conclusion
In conclusion, a loan against a fixed deposit can be a valuable financial tool when used responsibly. By considering the factors mentioned above and evaluating your financial situation, you can make an informed decision and harness the benefits of this borrowing option while safeguarding your financial stability.
