Fixed deposits are one of the most simple and cost-effective ways to raise finances. You can borrow against your FD in one of two ways: take out a loan against from icici bank or request an overdraft from icici bank (OD).
A fixed deposit is one of the most common financial vehicles that we are familiar with. It is a consumer favourite due to its ease of investment, guaranteed returns, flexibility, and other advantages.
This deposit can help you meet your short- and long-term finance needs while also earning interest. Instead of prematurely breaking your Fixed Deposit, you might get an Overdraft or a loan against it. The one prerequisite is that you must hold a fixed deposit with you. The process is simple, seamless, and hassle free.
Tenure of Loan Against FD ICICI Bank
A loan secured by a bank fixed deposit is a secured loan that uses the bank FD as collateral. As a result, as long as the bank FD is active, the loan’s tenure is unspecified. However, the maximum period for which you can take the Loan Against FD ICICI bank is 18 months.
Eligibility for a Loan Against FD ICICI Bank
- Resident citizens of India
- Hindu Undivided Family (HUF)
- Sole proprietorships, partnership firms, and companies including group companies
- Clubs, associations, and societies
- Family trusts
- Non-Resident Indians (NRIs) who have invested in term deposits such as Non-Resident External (NRE), Non-Resident Ordinary (NRO), and Foreign Currency Non-Repatriable (FCNR) deposits, are also eligible to apply for a loan against their respective fixed deposits.
Features of Loan Against FD ICICI Bank
- You can opt for a loan against a FD held by you in your name or jointly with your spouse.
- The sanction amount is limited to 90% of the value of the fixed deposit. For instance, if you hold FD with an amount of Rs 1 lakh. Then you can opt for a loan up to Rs 90,000.
- Flexible loan tenure with a maximum tenure of 18 months.
- Unlike other loans, there are no loan processing fees.
- You need not pay any prepayment charges.
- A very useful means of credit when you do not have a credit history
- Compared to other loans, the approval and disbursement process is seamless, easy, hassle-free, and timely.
Benefits of Loan Against FD ICICI Bank
- You can borrow up to 90% of the value of your fixed deposit. Even after the loan has been approved, the remaining funds in the fixed deposit account will continue to earn interest.
- Loans against fixed deposits have a substantially lower interest rate than other types of loans. Let’s say it’s only 2% to 3% higher than the fixed deposit rate. If your bank gives 4% percent on a fixed deposit account, you’ll have to pay 6% percent on your loan against the FD. This is far lower than the average interest rate charged by banks on personal loans.
- Unlike other types of loans, there is no need to pay an additional processing charge. As a result, the loan’s overall cost is reduced.
- A loan against a fixed deposit is quite simple to obtain. Because you already have a fixed deposit account, there isn’t much paperwork to fill out. You only need to complete the required documents, and you may even apply for a loan against a fixed deposit online.
- Unfortunate circumstances, emergencies and unexpected developments may cause many depositors to prematurely withdraw their fixed deposit accounts in order to obtain immediate cash flow. You can, however, leave your fixed deposit intact while addressing your immediate cash needs if you take out a loan against it. This way you will retain the interest income to be earned, pay less interest on a loan, and effectively manage your cash inflow needs.
- You can lien the fixed deposit for the amount you need as a loan. The entire fixed deposit will not be a collateral. For instance, you have a fixed deposit of Rs 5 lakhs and you avail a loan for 2 lakhs. The lien will be for a part of the fixed deposit limited to Rs 2 lakhs. The rest of the fixed deposit will earn interest as usual.
Terms and Conditions
- The Borrower may only utilize the Facilities for the purposes specified by the Foreign Exchange Regulations, such as re-lending, agricultural / plantation activities, or real estate investment.
- The Borrower shall ensure that the Depositor/s receive no direct or indirect foreign exchange payment in exchange for consenting to put deposits to use the Facilities, and declare and affirm that the Facilities will not be used for arbitrage, speculation, or capital market investment.
- The Depositors shall not close the Term Deposits / withdraw the amounts of the Term Deposits during the tenure of the loan.
- The bank will release all securities held upon complete repayment of the loan. And, if the bank decides to keep the security, you, the borrower, will be informed of any outstanding claims as well as the documentation that allows the bank to keep the security until the relevant claim is paid/settled.
- However, if the Borrower fails to pay the above-mentioned amounts in default for payment, as well as the penal interest and other charges imposed by the Bank, within 90 days of the due date, the loan or drawl account would be designated as a Non-Performing Asset (“NPA”).
Frequently Asked Questions
Yes, you can take a loan against FD from ICICI Bank. You need not prematurely withdraw your fixed deposit and lose interest income. With a loan against FD, the loan will be based on the fixed deposit as a collateral. The interest rate on the loan is usually 2% to 3% higher than the FD interest rate.
Yes, it is a good decision to take a loan against FD. Other funding options such as a personal loan carries a higher interest rate. The loan is costlier than a loan on FD. The interest rate on the loan is usually 2% to 3% higher than the FD interest rate. The loan processing fee is nil and no charge on prepayment. Rather than withdrawing your entire FD, it is a better option to take a loan for the amount you need and let the rest of FD earn interest.