Loan Against FD – Interest Rate, Repayment & All Info (2021)
Are you looking for a loan? If so, then Loan against Fixed Deposit is the best option. With this special type of loan, borrowers get to enjoy an interest rate that’s just 1% to 2% higher than their fixed deposit rates. In addition to that, they also have peace of mind knowing that they won’t need to pay any additional charges or fees for borrowing from their FDs and will be able to repay the loan in full with no penalties!
Loan against Fixed Deposit is one of the most flexible loans on offer because it can be used for anything – whether it’s buying a new car, paying off medical bills, or even taking a vacation abroad. It doesn’t matter what you’re using your loan against FD for.
Who can Avail Loan Against FD
When financial emergencies arise, like expensive medical bills or paying off a wedding, people are always looking for loans from various sources to meet their needs. One such source is a loan against fixed deposits. Loan against FDs allows you to pledge your deposit as collateral and in return get a cash advance equal up to 90% of the deposit amount with no need of breaking it. Instead, an individual can get that money without having any other problems until their ability to pay back the borrowed sum plus interest charges on time before the coming due date which may be anywhere between 60-180 days depending upon what term agreement has been made by both parties involved (borrower & lender).
Anyone who has an active fixed deposit is eligible for a loan against FD.
Fixed deposit rates are usually higher than personal loan interest rates, so it’s better for borrowers with a lower credit score or those who don’t have any collateral available because they can borrow at the same fixed-deposit (FD) lending terms as someone without an FD account and still qualify!
Who cannot apply
If you have a FD in the name of a minor, that does not qualify for a loan against fixed deposits.
Investors of 5-year tax-saving FD cannot apply for this type of loan.
- Filled up application form
- Fixed deposit receipt.
- Identity Proof
- Address Proof
Features & Benefits of Loan against FD
There are a lot of benefits of applying for a loan against FD. To help you understand it better, we have accumulated some major points that you need to know.
Quick processing – The processing time for a loan against FD is usually less than 24 hours. The borrower can get the money in their account as soon they have submitted all necessary documents and completed formalities.
Minimal Documentation – The documentation required to get a loan against FD is minimal. The borrower needs to submit a few documents like proof of identity, bank statement and PAN card copy for KYC verification, etc. The documentation required varies from one lender company or the financial institution (FI) to another but the process remains much simpler than applying with other loan products such as personal loans where you need a lot of paperwork.
Flexible Repayment – There is a monthly interest that you have to pay for your loan. But in case you wish to close the loan or pay back some amount of the loan, you can pay it directly whenever you have money.
Zero Charges – Another great feature of a Loan against FD is that there are no charges. There is not even a processing fee for the loan, which means that you can get your money as soon it has been approved and deposited into your account.
Disadvantages of taking a loan against FD
If a borrower fails to service the loan, the bank has the right to foreclose the fixed deposit to recover the money lent
The tenure of the loan given against the FD cannot exceed the residual tenure of the fixed deposit
Interest Rate for Loan Against FD
Most of the banks charge 2% above the rate of interest being paid out to you for the fixed deposit. Most banks offer up to 90% of the amount of your fixed deposit.
This means that if you are getting 7% interest from your FD of Rs. 10 Lakh, you can avail loan against your FD at 2% above 7%. This means you can get a loan of Rs. 9 Lakh at 9% interest.
Ideally, you’ll only be paying 2% interest.
Axis Bank = 2% above term deposit rate.
State Bank of India = 1% above the fixed deposit rate.
HDFC Bank = 2% above the FD rate.
ICICI Bank = 2% above the FD rate.
Federal Bank = 2% above the FD rate.
However, these rates may change from time to time.
How to apply for a loan against FD
If you are looking forward to applying for a loan against your FD, you’ll need to visit the bank and show them proof of fixed deposit receipt. Talk with their manager about what they can offer for loans in this case – most banks will be able to make up 90% or more than that amount as long it is not over Rs 50 lakhs (in some cases).
I hope that this article about loans against FD might have given you good information. I am sure, it will help in making the right decision for your financial needs and requirements of life! Good luck with all future endeavors!! 🙂