How To Get a Loan Against Fixed Deposit To Finance Urgent Needs?

A loan against a fixed deposit is an optimal solution to continue your investment while managing your financial needs. Some deposits allow premature withdrawal with a specific penalty amount. This gives you access to your investment in case of emergency. 

However, withdrawing before completing your maturity period can cause a loss in returns. A better solution is to opt for a loan against your FD account. Read on to know when a loan against FD is the right option and how to make an informed decision. 

What Is Loan Against FD?

This is a loan where your fixed deposit acts as collateral. This can be a beneficial way to access funds during times of need. Depending on your deposit amount and the bank, you can get up to 95% of the amount as a loan. This makes it a great option to leverage to secure investment. 

Moreover, you continue to earn interest during the loan tenure and investment period. This way you can enjoy dual benefits. 

What Are the Eligibility Criteria?

Anyone with a fixed deposit can apply for this loan, as most lenders have very simple and easy-to-meet eligibility criteria. However, here are a few points you need to know before considering this option.

• You should be a resident of India 
• Minors are not eligible for the loan application against FD
• Hindu Undivided Families can apply for this loan
• Businesses run by single person or sole proprietors can apply for this loan
• Businesses run by multiple persons can apply for this loan
• Five-year tax-saving fixed deposit accounts are not eligible for this type of loan
• Loan tenure cannot exceed the fixed deposit tenure

Also Read: Callable FD Vs Non-callable FD

Why Should You Consider Such Loans?

Before making any financial decision, it’s important to compare the pros and cons. Here are some reasons why this is a pocket-friendly loan option. 

• You can get a loan against a fixed deposit without an excellent credit score
• During the loan tenure, you still earn interest on the FD 
• In comparison to an unsecured loan, the interest rate is lower
• Applying for such a loan is a quick and convenient process, as your financial institution may not require any additional verification
• Getting this loan is easy in comparison to a personal loan because the financial institution already has your FD amount as collateral

Although it is a beneficial solution for quick access to finances, you should consider a few points before going ahead. 

• You should have knowledge of interest related to the loan and compare it with other available options 
• You should evaluate the risks of non-repayment as your FD can be liquidated by the bank if you cannot repay
• Consider the repayment terms like the amount and frequency to avoid the penalty for missing an EMI
• Some financial institutions may charge processing fees for the loan sanction 
• You cannot withdraw the fixed deposit amount until your loan is paid
• Check the charges on foreclosure or prepayment to make a smart repayment plan to avoid paying high-interest 

Using a Loan Against Fixed Deposit Calculator

Before taking a loan, it is important to consider all the terms. As such, you can use a loan against FD calculator to decide on the following:

• Loan lifecycle
• Maximum loan amount
• Comfortable interest rates
• Total repayment amount  

Using this calculator, you can plan whether a long-term loan or quick repayment is ideal for you. Furthermore, you can compare the interest rate offered by your bank with other options available in the marketplace.

Considering this information, you can weigh the benefits of a personal loan or loan against an FD and decide accordingly. If you are looking for a loan but don’t have a fixed deposit, consider opting for a Fibe Instant Cash Loan.

We offer flexibility with customisable tenures and competitive interest rates. You can apply in just a few minutes online and get the funds instantly to manage umpteen planned or unplanned expenses. Download the Fibe Loan App or log in to our website to explore your options today. 

FAQs on Loan Against FD

Will I continue to earn interest on my Fixed Deposit if it’s pledged as collateral for a loan?

Yes, you will continue to earn interest on your fixed deposit even after you have pledged it as collateral.

What is the process for repaying a loan taken against a Fixed Deposit?

You can opt for an EMI option to repay the loan amount against your fixed deposit across your chosen tenure. 

What is the repayment tenure for a loan taken against a Fixed Deposit?

There is no standard tenure, as it depends on the lender. 

Are there any types of deposits where loans against Fixed Deposits are not permitted?

If you have invested in a five-year tax-saving FD, then you may not be able to get a loan against it.