Personal Loan Against FD

What is a Personal Loan Against FD?

A personal loan against FD is a secured loan option. In this, your fixed deposit is kept as collateral with the bank. You continue to earn returns as per the FD interest rates, while the bank offers you a loan against a portion of your FD value.

This facility helps meet urgent or planned expenses without disturbing your long-term savings. You can also use an FD calculator to estimate the maturity value of your deposit while planning the loan amount.

Features of Personal Loan Against FD

The features of a personal loan against FD are: 

• Loan amount: Up to 85%–95% of the FD value, depending on the bank.
• Interest rates: Usually 0.75%–2% p.a. above FD interest rates.
• Overdraft facility: Available with most banks.
• Fees & charges: Low or zero processing fees.
• Access channels: Branch, internet banking, or mobile banking apps.
• Repayment flexibility: Lump sum or periodic interest payments.
• FD remains active: Your deposit continues to earn interest.

This facility is available across most fixed deposit schemes, except specific categories like tax-saving deposits.

Documents Required for Personal Loans Against FD

The documentation process is simple and minimal. Commonly required documents include:

• Loan application form
• Fixed deposit receipt
• Letter of lien/pledge
• KYC documents (PAN, Aadhaar, etc.)
• Cancelled cheque (for non-cumulative FDs)
• Overdraft or loan agreement

Top Banks Offering Personal Loans on Fixed Deposit

Find the comparison of leading banks offering loans against fixed deposits below:

Premature FD Withdrawal vs Personal Loan Against FD

The difference between taking a personal loan on FD and premature liquidation of an FD account is tabulated below:

Standard Personal Loan vs Personal Loan Against FD

Let us understand how a separate personal loan is different from a personal loan on fixed deposit in the following table:

Benefits of Personal Loans Against FD

• Quick liquidity during emergencies: Provides immediate access to funds when you face urgent financial needs.
• Lower Interest Cost Compared to Regular Personal Loans:  Interest rates are generally lower since the loan is secured against an FD.
• Overdraft Flexibility for Short-Term Requirements: Allows you to withdraw funds as needed within the approved limit.
• No Premature FD Breakage: Your fixed deposit remains intact, ensuring your savings continue to grow.
• Minimal documentation and faster approval: Requires limited paperwork and is processed quickly by banks.
• Suitable with tax saving FDs: Loans can be taken against most FDs; however, loans are not allowed on 5-year tax-saving FDs.

Points to Consider Before Taking a Personal Loan Against FD

Consider the points mentioned below before raising a loan against FD:

• Loan facility is not available on 5-year tax-saving FDs
• Minors cannot avail loans against FD
• Joint FD holders share repayment responsibility
• Interest is charged only on the utilised loan amount
• Assess repayment ability to avoid stress

Conclusion

A personal loan against FD is a smart and economical way to meet short-term funding needs without compromising your long-term savings. With lower interest rates, flexible repayment, and easy availability across major banks, it is often a better alternative to premature FD withdrawal or high-interest personal loans. When used wisely, it helps maintain financial stability while ensuring liquidity.