Things to Know Before Taking a Loan Against Fixed Deposit

A fixed deposit (FD) is one of the safest and most preferred investment options for many individuals. However, breaking it prematurely to manage an urgent financial need can lead to loss of interest and penalties. That is where a loan against fixed deposit becomes a smart alternative. It allows you to borrow funds while keeping your FD intact and continuing to earn interest on it.  

Need quick liquidity without breaking your FD? Get a loan against fixed deposit and manage expenses smartly. 

A loan against fixed deposit is a secured credit facility offered by financial institutions where your fixed deposit serves as collateral. Instead of withdrawing the FD prematurely, you can pledge it and borrow a certain percentage of its value, generally between up to 75%. 

This facility helps you meet urgent needs such as medical bills, travel expenses, or education costs, without affecting your long-term savings. The best part your FD continues to earn interest throughout the loan tenure. 

Here are some important loan against fixed deposit features and benefits: 

• Instant access to funds: Loans are processed quickly since your FD acts as security. 
• Lower interest rates: The rates are usually 2% higher than the FD interest rate, making it cost-effective. 
• No need to break your FD: Continue earning interest while accessing liquidity. 
• Flexible repayment options: You can choose a repayment tenure as per your convenience. 
• Minimal documentation: Since it’s a secured loan, paperwork is simple and quick. 
• No impact on credit score: Since you are pledging your own asset, approval is easy and less dependent on your credit history. 

Before opting for this loan, it is important to understand a few critical aspects: 

• Loan-to-value (LTV) ratio: Most lenders allow up to 75% of your FD’s value as a loan. 
• FD remains lien-marked: Your FD will be marked as pledged until you repay the loan in full. 
• Interest continues: Your FD continues earning interest during the loan tenure. 
• No tax benefits: Interest paid on the loan is not eligible for tax deduction.

Most institutions follow similar eligibility conditions, which include: 

• The FD should be in the applicant’s name (or jointly held). 
• Both individuals and non-individual entities can apply. 
• The applicant must be an existing FD holder with the lender. 
• The loan tenure is equal to the remaining FD tenure. 
• The applicant should be at least 21 years of age to apply for loan against FD. 

Check your eligibility and get instant approval on your loan against fixed deposit in minutes. 

Below is an indicative table of common charges and rates applicable: 

Taking a loan against your FD does not stop it from earning interest. Your deposit continues to grow as per the agreed rate. However, since the FD is lien-marked, you cannot withdraw or close it until the loan is fully repaid. 

If you default, the lender may liquidate the FD to recover dues, which will impact your savings. Hence, it’s advisable to borrow only what you can comfortably repay. 

The tenure of a loan against FD typically matches the FD’s maturity period. Interest is charged only on the amount utilised, which makes it cost-effective compared to unsecured loans. 

Some lenders even allow overdraft facilities, letting you withdraw funds as needed and pay interest only on the utilised amount. 

The amount you can borrow depends on your FD value. Usually, lenders approve up to 75% of the deposit. For example, if your FD is worth Rs. 5 lakh, you can get a loan between Rs. 3.75 lakh and Rs. 4.5 lakh. 

The credit limit and interest rate also depend on your FD tenure and deposit type (regular or cumulative). 

The documentation for a loan against FD is minimal. You typically need: 

• A valid KYC document  
• Your FD receipt or details 
• A signed loan against FD application form 

Application process 

1. Fill out the loan application form online or offline. 
2. Submit KYC documents along with FD details. 
3. Loan gets approved and disbursed instantly after verification. 

Since the FD already acts as collateral, there’s no need for income proof or a credit check in most cases. 

Choosing a loan against FD offers multiple benefits compared to breaking the deposit early: 

• Continued interest earnings: FD remains active and continues to earn returns. 
• Avoid penalties: No premature withdrawal charges apply. 
• Lower cost of borrowing: Interest rates are far lower than personal loans. 
• Quick access: Instant disbursal without affecting your savings plan. 

Here are some practical scenarios when this option makes sense: 

• Emergency medical expenses: Access funds instantly without breaking your FD. 
• Business cash flow needs: Short-term liquidity without affecting investments. 
• Education or travel costs: Borrow smartly at a lower rate. 
• Debt consolidation: Replace high-interest loans with a cheaper secured option. 

Meet urgent needs efficiently, get a loan against fixed deposit, and keep your savings intact. 

You can easily estimate your loan cost using a loan against fixed deposit EMI calculator. Enter your loan amount, interest rate, and tenure to view the monthly instalment and total interest payable. 

This helps you compare repayment options and plan your finances better. Since the interest is charged only on the utilised amount, you can save significantly by borrowing judiciously. 

A loan against fixed deposit is an excellent way to meet short-term financial needs without compromising your savings. It offers flexibility, lower interest rates, and quick approval, all while your FD continues to grow. Before applying, review the loan terms, repayment options, and potential impact on your deposit. Understanding these things to know before taking a loan against a fixed deposit can help you make a well-informed decision. 

Preserve your savings and access instant liquidity with a loan against fixed deposit. Apply today and borrow smartly.