Loan Against Fixed Deposit

If you have a fixed deposit or FD and need a loan but have poor credit don't meet income requirements or lack other collateral you can borrow against your FD. These loans can be repaid over up to 60 months and have interest rates 1% to 2% higher than your FD rate. They usually come as demand loans or overdraft loans.

What is Loan against FD?

A loan against a fixed deposit or FD is a secured loan where you use your FD as collateral. It's like having a credit line based on your FD. This allows you to borrow money without breaking your FD, which is handy in financial emergencies.

Lenders usually allow borrowers to access a portion of their fixed deposit's value as a loan, commonly up to 90%. However, the precise amount you can borrow is determined by the lender. The interest rate on this loan is usually higher than the interest you earn on your FD. However, you only pay interest on the money you actually borrow not the full limit available. This can make it a cost effective way to get short term funds.
 

Who is eligible for a loan against a fixed deposit?

The following groups can get this loan:

• Indian citizens living in India
• People with individual or joint fixed deposit accounts
• Hindu Undivided Families (HUF)
• Family trusts
• Sole proprietorships, partnerships and group companies
• Clubs, associations and societies

Features and Benefits of Loan Against Fixed Deposit

Taking a loan against your Fixed Deposit offers several benefits:

1. No Pre payment Penalty: You can repay the loan early without any extra fees and your FD continues to earn interest during the loan period.
2. Minimal Documentation: The loan process is straightforward since the bank already has your details. You only need to submit your FD receipt and ID proof along with the loan application.
3. Lower Interest Rates: These loans have lower interest rates because your FD serves as security resulting in cheaper monthly payments compared to personal loans.
4. No Credit Score Check: Your credit score doesn’t impact your eligibility for the loan making it a viable option for those with low credit scores.

Overall, taking a loan against your FD is a convenient, low cost borrowing option that requires minimal paperwork, has no pre payment penalties and offers lower interest rates all without relying on your credit score.
 

Documents are required to apply for a loan against a Fixed Deposit

The documents needed for getting a loan against a fixed deposit can vary by bank. Some banks might not ask for any extra paperwork while others might have specific requirements. It's best to ask the bank where your fixed deposit is to find out exactly what they need. Generally, you'll need to provide:

1. A signed loan application form.
2. Your fixed deposit receipt.
3. Any standing instructions you've given to the bank, if they apply.

Checking directly with your bank ensures you have the correct and complete list of required documents.

How to apply for loan against fixed deposit

• Visit the website of the bank.
• Look for the Fixed Deposit section.
• Click on Overdraft/Loan Facility against FD.
• Provide details like the term of the loan and the desired loan amount.
• Submit your loan application online.
• You'll receive a notification via SMS or email confirming your application submission.
• Final amount shall be calculated based on your investment amount in the FD.
   

List of Banks Offering Loans Against FD

Conclusion

If you need money fast and you already have a fixed deposit at a bank getting a loan against it is a smart move. This loan has lower interest rates and needs less paperwork compared to other loans. Plus, you don't need a good credit score to qualify so more people can get it. It's a handy way to get cash quickly while keeping your fixed deposit safe.