What Is Loan Against FD?
A Loan Against FD (Fixed Deposit) is a type of secured loan where you borrow money by pledging your fixed deposit as collateral. Instead of breaking your FD in times of need, you can take a loan against it and meet urgent financial requirements without losing the interest benefits. This is a quick and easy way to get funds at a lower interest rate compared to personal loans. In this article, we’ll explain how a loan against fixed deposit works, its benefits, eligibility, and how to apply for it easily.
What Is a Loan Against Fixed Deposit?
A Loan Against FD is a facility offered by banks and financial institutions that allows customers to borrow funds by using their fixed deposit as security. This means you don’t have to break your FD prematurely and still get the money you need. The loan amount is usually up to 90%–95% of the FD value, and interest is charged slightly higher than your FD interest rate.
Features of Loan Against FD
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Loan Amount: Generally, 75% to 95% of the FD amount
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Interest Rate: 1% to 2% higher than FD interest rate
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Repayment Tenure: Can be up to the remaining FD term
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Collateral: No need for additional security or guarantor
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Quick Disbursal: Funds are disbursed quickly, often within 24 hours
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No Processing Fee: Many banks do not charge processing fees
Eligibility for Loan Against FD
Any individual or entity with an active fixed deposit account can apply for a loan. Here are the general eligibility criteria:
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Must hold an FD with the bank/NBFC offering the loan
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The FD should be in the name of the applicant or jointly held
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Minors are not eligible unless represented by a guardian
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NRE/NRO FDs may have limited eligibility, depending on the bank’s policy
How to Apply for Loan Against FD
1. Online Application
Most banks offer online applications through net banking or mobile apps. You can log in, select the FD, choose the loan amount, and submit the request digitally.
2. Offline Application
Visit your bank branch and fill out the application form for a loan against FD. Submit the necessary ID proof and signed documents. The process is quick, and the loan is generally processed the same day.
Documents Required
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Fixed Deposit receipt or details
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Identity Proof (Aadhaar card, PAN card)
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Address Proof
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Signed loan agreement (as required by the bank)
Benefits of Loan Against FD
1. No Need to Break FD
You continue to earn interest on your FD while getting funds for urgent needs.
2. Lower Interest Rate
Interest rates are much lower than unsecured loans, usually 1%–2% above FD rate.
3. Fast Approval
Since your FD is the collateral, the bank approves the loan quickly.
4. No Credit Check
Your credit score isn’t a major factor, making it easier to get the loan.
5. Flexible Repayment
Repay the loan anytime during the FD tenure without penalties in most cases.
When Should You Take a Loan Against FD?
You can opt for a loan against fixed deposit in the following situations:
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Medical emergencies
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Business or cash flow needs
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Education expenses
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Travel or wedding costs
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To avoid breaking long-term FDs for short-term needs
Points to Remember
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Loan tenure cannot exceed the maturity date of your FD
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If you fail to repay, the bank can liquidate your FD
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Interest continues on the FD during the loan period
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Not all banks offer this facility on tax-saving 5-year FDs or NRI FDs
Conclusion
A loan against FD is a smart and cost-effective way to meet urgent financial needs without disturbing your savings. With low interest rates, easy processing, and no need for a high credit score, this loan type is perfect for anyone holding a fixed deposit. Always compare bank offers and check terms before applying to make the most of this facility.