New Delhi: Fixed deposits are one of the most traditional and trusted ways of investment. The hassle-free process, guaranteed fixed returns, and several other factors make fixed deposits an attractive investment option. However, only a very few people know that fixed deposits are much more than just an investment avenue.
If you have an urgent need for money, one of the options you’d consider is availing a loan against various assets. But did you know that you can also avail a loan against your fixed deposit?
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You can pledge your fixed deposit as collateral. Taking a loan against a fixed deposit is a secured loan in nature. In order to meet some financial emergency, it’s always advised to consider your fixed deposit as a collateral as banks charge comparatively lesser rate of interest than the other forms of loan. This loan is mainly disbursed by the bank in the form of an overdraft.
What’s The Loan Amount You Can Avail?
The loan amount you can avail depends on the FD deposit amount. This can go up to 90 per cent 95 per cent of the deposit amount.
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Who Can Avail Loan Against FDs?
All fixed deposit holders including individual holders and joint account holders can use it as collateral against loans. However, FD in the name of a minor does not qualify for this facility. Also, the investors of a five-year tax-saving FD cannot apply for this type of loan
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What Are The Benefits of Loan against FD
- Loan against FD charges a lower interest rate compared to other types of loans like personal loans (0.5 per cent to 2 per cent above the applicable FD rate)
- You don’t have to break FD and go for a premature withdrawal that result in a loss of interest on FD.
- No processing fee is charged while taking loan against FDs.
- Loan against FDs can be availed against domestic as well as NRI FDs.
- The loan repayment can be done as a lump sum or in installment (not later than FD tenure)
Because a customer’s FD is kept as collateral while availing loan against fixed deposit, the loan thus raised is secured. Hence, the interest charged for the secured loan is lesser. If the loanee is not able to repay the amount, the bank can easily procure it from the FD amount. Usually, this amount is settled at the time of maturity.
