Loan Against Fixed Deposit

A Loan Against Fixed Deposit is a secured loan that allows you to borrow money by using your FD as collateral. This means you don’t need to break your fixed deposit to meet urgent financial needs. It is a smart and low-risk way to get funds quickly, and the interest rate is lower than unsecured loans like personal loans. This facility is offered by most banks and NBFCs and comes with flexible repayment terms. In this article, we will explain how it works, its benefits, eligibility, and the application process.

] ] ] ]

What is Loan Against Fixed Deposit?

Loan Against FD is a credit facility where the borrower pledges their fixed deposit as security to get a loan. The bank allows you to borrow up to 90–95% of the value of your FD. You continue to earn interest on the deposit, and you pay interest only on the borrowed amount. The loan tenure usually matches the FD term, and the FD remains locked until the loan is repaid.

Features of Loan Against FD

Loan Amount: Up to 90% of the FD value
Interest Rate: 1% to 2% higher than the FD interest rate
Tenure: Same as or less than the FD maturity period
Collateral: No separate collateral needed
No Processing Fee: Some banks may waive it
Quick Disbursement: Instant loan approval and transfer

Benefits of Loan Against Fixed Deposit

1. Low Interest Rates

Since this is a secured loan, the interest rate is much lower compared to personal or credit card loans.

2. No Need to Break FD

You continue earning interest on your FD, even while using it as collateral.

3. Easy and Fast Processing

As the FD is already with the bank, the loan gets approved quickly without lengthy verification.

4. No Credit Score Requirement

You can get a loan even with a low or no credit score since your FD secures the loan.

5. Flexible Repayment

Most banks offer flexible repayment options with no prepayment penalty.

Eligibility Criteria

Must have a fixed deposit with the bank/NBFC
FD should be in your name or jointly held (as per lender’s policy)
Minors are not eligible
Tax-saving FDs are usually not eligible
NRE/NRO deposits have limited options

How to Apply for Loan Against FD

1. Online Method

Login to your internet banking account
Select the option for “Loan Against FD”
Enter the loan amount and tenure
Accept terms and confirm to get instant disbursal

2. Offline Method

Visit your bank branch
Fill out the loan application form
Submit ID proof and FD receipt
Loan is processed within a few hours

Documents Required

Fixed Deposit receipt or details
Identity proof (Aadhaar, PAN)
Address proof
Signed loan agreement (if applicable)

When Should You Choose a Loan Against FD?

A loan against fixed deposit is ideal for:

Medical emergencies
Business or personal cash needs
Paying education or travel expenses
Managing temporary financial shortages

Instead of liquidating your FD and losing interest income, you can borrow against it at low cost.

Things to Keep in Mind

Loan must be repaid before FD matures
If you default, the bank can break the FD
Some banks may not offer loans on 5-year tax-saving FDs
Interest continues on FD during the loan period

Conclusion

A Loan Against Fixed Deposit is a simple, fast, and cost-effective way to borrow money in emergencies. With benefits like low interest rates, no credit check, and quick disbursal, it is one of the best options for FD holders. Before applying, compare terms and conditions across banks to choose the best deal.

Category: Loan

Loan Against Fixed Deposit Explained -Technosity.in