How to Get a Personal Loan Against a Fixed Deposit

Imagine needing quick funds for an emergency but you don’t really want to break into your hard-earned savings. A loan against a fixed deposit can be the perfect financial solution in such situations. FD loans are provided by financial institutions as secured loans eliminating the need for credit checks. In addition, you retain your deposit and the original investment benefits. A personal loan against an FD is therefore a win-win situation that offers both financial flexibility and security. Read on to learn more about how to get a personal loan against your FD and make the most of your savings.

What is a Loan Against a Fixed Deposit

A loan against a fixed deposit is a secured loan where your deposit serves as collateral. This means that the lender holds your FD as security and provides you with a loan amount based on its value. Typically, lenders offer anywhere between 60% to 75% of the FD value as loan amount although this may vary from lender to lender. At the same time, you continue to earn interest while utilising the loan amount.

Eligibility Criteria for Personal Loan Against a Fixed Deposit

Ideally, lenders offer FD loans to users who already have a fixed deposit account with them. Although eligibility requirements may vary from lender to lender, anyone who matches the below-mentioned general eligibility criterion can avail of a loan against FD.
•    Indian nationals
•    Who are at least 18 years of age
•    Salaried individuals, self-employed professionals and businessmen
•    Having an FD of at least ₹5000 with the lender
•    FD should be at least 3-6 months old
•    FD receipt must be marked as a guarantee in favour of the bank's lender

Features and Benefits of a Loan Against Fixed Deposit

Taking a personal loan against your fixed deposit comes with several advantages that make it a smart financial choice. Here are the most promising benefits of a FD loan.

1. Easy approval: Getting a loan against a fixed deposit is straightforward. Since your fixed deposit serves as collateral, the approval process is quick and requires minimal documentation.
2. Lower Interest Rates: One of the most significant advantages of a personal loan against a fixed deposit is comparatively lower interest rates. Typically, the interest rate on an FD loan is just 1-2% higher than the interest rate on the FD itself. This makes it a cost-effective borrowing option.
3. Retain Benefits of FD: When you take a personal loan against your fixed deposit, you continue to earn interest on your deposit. This means you can access funds without losing the benefits of your original investment.
4. No Prepayment Charges: Most lenders do not charge any extra fees/penalties for prepaying a loan taken against a fixed deposit. You can repay the loan amount before the maturity date without incurring any additional costs.
5. Not Dependent on Credit Score: Since FD loans are secured in nature, there is ideally no or minimal impact of your credit score on the approval process. This makes it an excellent option for those who might have a lower credit score.
6. Flexible Loan Amount: Typically, lenders offer up to 75% of the value of your fixed deposit as loan. However, they also allow flexibility to borrow only as much as you need. 
7. No EMI Repayments: Certain lenders provide the facility of not paying EMIs after taking the loan. The loan amount and the interest can be paid any time before the maturity date of your fixed deposit. If the amount is not paid by then, it will be adjusted from the maturity proceeds of your deposit.
8. Overdraft Facility: Some lenders offer an overdraft facility against your FD. This allows you to withdraw funds as needed, up to a certain limit, without breaking your FD. You only pay interest for the amount you use, providing flexibility and convenience.

How to Apply for a Personal Loan Against Fixed Deposit

In the digital era, applying for a loan against a fixed deposit is straightforward. You can apply easily from a smartphone or laptop with a lender of your choice.

 Follow the below general steps to apply for a personal loan against fixed deposit.
•    Step 1: Visit the website of your preferred lender
•    Step 2: Navigate to the page for a loan against fixed deposit
•    Step 3: Click on “Apply Now”
•    Step 4: Provide your basic details
•    Step 5: Provide details of your existing FD
•    Step 6: Upload necessary documents
•    Step 7: Click on “Submit”.

Things to Consider Before Taking a Personal Loan Against Fixed Deposit

The customer-centric features of a personal loan against a fixed deposit makes it a smart choice to access funds without breaking into your savings. However, here are a few things to consider before applying for an FD loan. 
•    Assess your needs and estimate how much you can borrow against your deposit.
•    Compare the interest rates to understand the overall cost of borrowing. 
•    Read the terms & conditions. Lenders will often not allow you to pre-maturely withdraw your FD if it has been pledged as a collateral. 
•    Identify any processing charges before applying for the loan. 
•    Make sure that there are no pre-payment or foreclosure charges.

To Conclude

A personal loan against a fixed deposit can be a lifesaver for those who want to access quick credit even with a lower credit score. You can easily get an FD loan if you have an existing fixed deposit just by fulfilling a few simple eligibility criteria. Since FD loans are secured in nature, they inherently come with unique features and benefits such as comparatively lower interest rates, minimal documentation, easier approvals, overdraft facilities and more. However, it is always the best practice to evaluate your needs and read the fine print carefully before applying for a loan against fixed deposit to make a smart financial decision.

Frequently Asked Questions

Is it possible to get a loan against my fixed deposit?

Yes. Taking a loan against your fixed deposit is a smart financial decision to conserve your savings while getting quick funds. In addition, you also retain the investment benefits of your fixed deposit. 

What are the benefits of a personal loan against a fixed deposit?

There are various unique benefits of taking a personal loan against a fixed deposit. These loans are secured in nature leading to easier approvals, lower rates, conservation of your hard-earned savings, flexible loan amount, overdraft facilities and more. 

What is the maximum loan amount I can get against my fixed deposit?

In general, lenders provide anywhere between 60% to 75% of the value of your fixed deposit as loan amount. However, this can vary from lender to lender and may be influenced by various other factors including your creditworthiness.