Bank loans on fixed deposits offer a convenient way to meet financial needs. Unlike other types of loans, you can easily obtain a loan from the bank against your fixed deposit amount. This loan option comes with several advantages, including a more affordable interest rate compared to market loans and a straightforward application process without the need for extra documentation.
Getting a loan on your fixed deposit is a hassle-free process. You don’t have to worry about credit card history, and the loan processing is fast. This convenient method has gained popularity among borrowers. For retail customers, credit on fixed deposits is generally available in three ways, and there is flexibility in repaying the loan before the agreed time frame or maturity.
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The loan amount you can get depends on the bank’s policy, usually in the form of an overdraft facility. The credit limit approved is typically between 70-95% of the deposit amount, though some banks may offer more. It’s important to note that the entire fixed deposit amount cannot be borrowed against.
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Compared to personal loans, the interest rate on loans against fixed deposits is relatively low, making it an economical choice. Banks typically charge an interest rate that is 50-200 basis points higher than the interest rate earned on the fixed deposit. Experts suggest that interest rates on such loans can range from 5% to 8%.
Furthermore, this type of loan is considered secured, as it is backed by the fixed deposit itself. As a result, no processing fee is charged by the bank for availing this loan.
