Personal Loan Against FD

Let us learn more about personal loan against FD that top banks in India offer.

What is a Personal Loan Against FD?

A personal loan against FD is a financial facility that allows an individual to keep their Fixed Deposit as collateral to raise money. This helps the customers to get urgent funds for the short/medium-term, depending on their Fixed Deposit (FD) tenure. 

You can take a personal loan against FD for medical treatment, home renovation, or a wedding. The facility helps in keeping the savings intact while raising money to meet emergency expenses.

Features of Personal Loan on FD

Let us learn the important features of the facility of personal loan against FDs in the list below:

• Loan Amount: Get loans of up to 90-95% of Fixed Deposits value

• Overdraft Facility: Both facilities of personal loan and overdraft against FD are provided

• Interest Rates: Avail loans at low-interest rates i.e. generally, 1% over the FD interest rates

• Fees & Charges: Less to no loan processing fees or charges

• Penalties: Zero penalties on pre-payment of loan

• Channels to Access Facility: Internet banking/ bank apps/ physical branches

• Loan Repayment: Flexible loan repayment options e.g. in a lump sum or periodic instalments on a monthly/ quarterly/ annual basis

• Credit Card: Banks also offer credit card facilities on your FD funds

Documents Required to Get Personal Loan on FD

Let us learn the list of required documents to avail of a hassle-free loan against fixed deposits:

• Application form for the loan on FD

• Fixed deposit receipts

• Letter of pledge/ lien

• KYC verification documents

• Cancelled cheque, in case of non-cumulative FD

• Overdraft facility agreement

• Pledge of loan repayment

Top Banks Offering Personal Loans on Fixed Deposit

Here is a list of the top banks that offer personal loans against fixed deposits at attractive interest rates:

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 Fixed Deposit

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

Benefits

Personal Loan on FD is a beneficial facility towards strengthening your financial planning, considering the reasons below:

• Emergency Funds: Helps resolve immediate financial liquidity crunch

• Low-Interest Rates: Cheaper interest rates as compared to standard personal loans

• Overdraft Against FD: Banks also allow overdraft facility of a loan on FD amount

• No Fees/ Penalties: Generally, banks do not charge penalties and other fees for this facility

• Prevents Premature Liquidation of FD: Individuals need not break their FD or lose interest returns on their FD funds

• Minimal Paperwork: The applicant has to undergo only a fast and easy documentation process

Points to Consider Before Taking Personal Loan Against FD

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

• Both joint and single-life accounts can avail of a loan on fixed deposits.

• Minors are not eligible to get a loan on FD.

• Loan facility is not available with 5-year tax-saving FDs.

• For a Joint Life account, both the joint policyholders will be liable to repay the loan.

• Consider household income and expenses, before raising a large loan amount.

Wrapping It Up

Banks offer personal loans on Fixed Deposits to their customers at attractive interest rates. However, maintaining financial prudence is crucial to not distort your financial planning and create a stressful situation for your family. Besides, you must always consider your loan repayment capability before taking an overdraft against your FD.

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