All You Need to Know About a Loan Against Fixed Deposits

18 Feb 2020 // 29 min read // Personal Loans
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In life, we may be faced by certain unforeseen events and emergencies which we are emotionally and financially unprepared for. While we can always look up to our closed ones for emotional support, when it comes to financial aid, a Bank or an NBFC often proves to be our best bet!

While opting for the readily available Personal Loans is the norm in such situations, it may not always be possible due to multiple reasons such as inability to bear a high-interest loan, poor credit history, absence of a steady source of income, or absence of proof of employment.

Yet another source of quick cash is the money lying in your Fixed Deposit Account. However, pulling out that money before its maturity usually means a substantial loss on the accrued interest. Thankfully, Banks and NBFCs across India understand this situation and therefore provide a great alternative, i.e.,  Loan Against Fixed Deposit.

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Loan Against Fixed Deposit

As the name suggests, a Loan Against Fixed Deposit is where a lender offers you a secured loan, wherein your fixed deposit account acts as collateral. Here, the maximum loan amount offered ranges from 75 to 90% of the value of your fixed deposit account.

In this case, the interest rate charged on loan is slightly higher than that you are earning on the FD account. Besides, the lender ensures that the repayment tenure of the loan ends before the maturity date of the FD account.

Benefits of Loan Against Fixed Deposit

As you may have come to understand by now, a Loan Against Fixed Deposit entails numerous benefits which include –

  • It helps in liquidity management, by ensuring that you get the required funds without breaking your Fixed Deposit.

  • Since Loan Against Fixed Deposit is a secured loan, it can be availed at a comparatively lower interest rate.

  • This type of loan is usually offered by the same lender with which you have your Fixed Deposit Account. Since the lender has already verified your identity and has all the requisite details, there is hardly any documentation required for a Loan Against Fixed Deposit.

  • For procuring Loan Against Fixed Deposit, you need not furnish proof of income or that of employment, since the bank has your account to fall back on in case of any default.

  • You can conveniently obtain a Loan Against Fixed Deposit, even with a comparatively lower credit score, since you are offering collateral in lieu of the loan amount.

  • When you take the loan through a commercial bank, you have the alternative to access the amount through checkbook, internet banking, online transfer as well as a cash withdrawal.

  • Unlike Personal Loan, Loan Against Fixed Deposit can be obtained for self, a third party individual, as well as for a corporate organisation.

  • The tenure of Loan Against Fixed Deposit can be comparatively longer provided it does not exceed the tenure of the Fixed Deposit.

Best Loans against Fixed Deposits in India

Now that you thoroughly understand the concept of Loan Against Fixed Deposit and the benefits that it brings along let us take a quick look at some of the leading loans against fixed deposit available in India.

Bajaj FinservLoan Against Fixed Deposit

Some of the salient features of this readily available loan are –

  • Value – For a cumulative FD, Bajaj Finserv offers a loan of up to 75% of the amount in the FD, while for a non-cumulative FD, that of up to 60% of the amount.

  • Processing Fee – The NBFC doesn’t levy any processing fee on this loan

  • Interest Rate – A fairly low-interest rate which is just 2% higher than the existing FD interest rate is levied on the loan

  • Documentation – Only single page documentation is required with the guaranteed loan approval

  • Extra Charges – Bajaj Finserv does NOT levy any foreclosure or prepayment charges on this loan

  • Repayment Options – The NBFC allows you to repay the loan flexibly starting 90 days from the date of approval, up to the remaining tenure of the fixed deposit.

SBI Loan Against Fixed Deposit

The inherent aspects of SBI Loan Against Fixed Deposit are –

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  • Value – Under SBI Advantage, the borrower can avail a loan amount of up to 90% of the value of their Fixed Deposit. In this case, the banks offer both, Demand Loan as well as Overdraft Facility, based on the needs of the borrower. As far as Overdraft is concerned the minimum loan amount is Rs. 25,000, while the maximum amount is Rs. 5 Crore.

  • Processing Fee – The Bank does not levy any processing charges for this loan.

  • Interest Rate – An interest rate which is just 1% above the relative time deposit interest rate is levied on the loan.

  • Extra Charges – Bajaj Finserv does NOT levy any foreclosure or prepayment charges on this loan.

  • Repayment Options – SBI offers a flexible repayment schedule, based on the repayment ability of the borrower. In the case of STDR or e-STDR, the maximum tenure is 5 years, while in the case of TDR or e-TDR, it is 3 years.

Axis BankLoan Against Fixed Deposit

Here is all you need to know about Loan Against Fixed Deposit offered by Axis Bank

  • Value – Axis Bank offers up to 85% of the amount of Fixed Deposit as the loan

  • Processing Fee – The Bank doesn’t levy any processing fee on this loan

  • Interest Rate – A fairly low-interest rate which is just 2% higher than the existing FD interest rate is levied on the overdraft against FD.

  • Documentation – The borrower must submit the following documents at the time of applying for Loan Against Fixed Deposit

  • Duly filled the application form

  • Duly signed agreement

  • Fixed / Term Deposit receipts duly discharged in favour of the bank

  • Extra Charges – Axis Bank does NOT levy any foreclosure or prepayment charges on this loan

  • Repayment Options – The Bank allows you to repay the loan in a rather flexible manner but before the end of the tenure of fixed deposit.

While there are numerous advantages pertaining to Loan Against Fixed Deposit, you must remember that once your loan is approved, you will no longer be entitled to break your FD before repaying the loan in full. Besides, if you fail to repay the loan, the lender may seize your account in order to recoup its losses. Hence, it is advisable for you to have an efficient repayment plan in place before opting for a Loan Against Fixed Deposit!

Also Read: Credit Card Against Fixed Deposits: A Tool to Build Credit Score

To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 100+ Banks and NBFCs. We have served 7 million+ happy customers since 1989.

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