A lot has changed in our banking system over the years, but our trust in FDs is still the same. It’s one of the most secure and beneficial yet simplistic ways of saving money. But what do you do when you face a cash crunch and don’t have any savings other than the FD?
Well, you don’t actually need to break your long term investment just yet. Instead, you can opt to take a loan against a fixed deposit and can still keep earning the interest on your FDs.
Such a loan is much better than a personal loan because of its low-interest rates. Here is a complete guide to loans against fixed deposits.
Benefits of Loan against Fixed Deposits
The loan against FD allows the customer to keep their FD amount as security in exchange for cash for personal reasons. It has a variety of advantages over the personal loan as well as breaking the FD, including the following:
- High-Value Loan
Since the bank is in a way using your money to loan you, you can get anywhere between 70% to 95% of the FD amount as a loan. For example, if your bank is offering 80% of FD value and you have FD worth Rs 8 Lakh, you will get a maximum of Rs 6.4 lakh as a loan against that.
- Low-Interest Rate
Banks typically charge 1-2% in addition to the fixed deposit interest rates, which is still much lower than that of a personal loan(14-30%). Moreover, you will continue to pay interest on your FD amount and thus will mostly be paying the interest you are getting on the FD amount.
- No Extra Charges
Banks usually don’t demand any prepayment or hidden costs on loans. You don’t even have to pay the documentation fee as most of your documents are registered to calculate fixed deposit interest rates in the bank records.
- Anyone can avail
It doesn’t matter if you have got a lower CIBIL score or don’t have any regular job. You can still get this loan without revealing the purpose of taking the money in detail. It doesn’t have to be an emergency, and you can use this money for business and so on.
- Tenure same as FD
The loan tenure is the same as that of the FD, which can be quite long, while some banks have a limit of up to 60 months. You can also pay the amount back in instalments or a lump sum as per convenience.
- Instant Loan Disbursal:
The loan against FD is the best option when you required some money on an urgent basis. Most of the lenders offer this service before select your lender for FD this is your responsibility to know that this lender offer loan against FD or not. This loan required minimal documentation and take less time to disbursal of loan. You can avail up to 80% loan of your principle amount most of the lender offer 70% loan amount of your principle.
Who can apply for FD?
- Both individual and joint account holders can raise a request for a loan against FD.
- FD for minors isn’t eligible to request for a loan.
- People who have invested in 5-year tax-saving FD can’t apply for a loan against it.
Since the amount is already with the bank, they don’t need much verification and can easily deduct the money if the customer fails to pay. Loan against FD thus is beneficial and convenient for both the bank and the customer.
I hope this article will help you to understand the loan against FD