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At a time of financial emergency it is quite obvious to seek a loan. Availability of a loan is difficult if you do not have a credit score or have a low credit score. It is wise to secure a loan against the fixed deposit you hold with the bank. Rather than redeeming your fixed deposit and paying penalty, you can avail a secured loan at a lower interest rate. In this article, we have covered all necessary aspects related to the loan against FD with any bank in India.

What is Loan Against FD?

A loan against FD is a credit facility offered by all the banks in India as a secured loan for a lower interest rate as compared to other unsecured loans. The amount of the loan depends on the policy of the banks. Moreover, this percentage varies from one bank to another with a maximum of 95% of the fixed deposit amount.

Banks offering Loan Against FD

BankLoan Limit As a Percent of FD AmountInterest Rate
SBI Bank85% of the value of your Time Deposit1% above the relative time deposit rate
HDFC Bank90% of overdraft on your FD2% above the fixed deposit rate
ICICI Bank90% of overdraft on your FD2% above the fixed deposit rate
Yes Bank90% of overdraft on your FD1% over and above the fixed deposit rate
Axis Bank85% of the value of your Time Deposit2% above the fixed deposit rate

SBI Bank Loan Against FD

  • Avail Loan up to 85% of the value of your Time Deposit
  • Min amount of Loan (For Online Overdraft against Fixed Deposit) : Rs 5000
  • Max amount of Loan (For Online Overdraft against Fixed Deposit): Rs 5 Crore
  • Margin : Avail loan up to 85% of your Time Deposit value
  • Security Lien on underlying Time Deposit
  • Type of loan : Demand Loan & Overdraft
  • Channels : Internet Banking/YONO/Branches
  • Processing fee: NIl
  • Interest Rate: 1% above the relative time deposit rate

HDFC Bank Loan Against FD

  • Loan upto 90% of overdraft on your FD
  • A minimum FD amount of Rs 25,000/- 
  • Minimum tenure of 6 months 1 day is required to Avail a Overdraft against FD/Super Saver facility
  • Rate of interest is 2% above the fixed deposit rate for the period that the money is used.

ICICI Bank Loan Against FD

  • Loan available against FD account, NRE, NRO, FCNR deposit
  • Repayment would be made either through a change in the Fixed Deposit or through new remittances from outside India via conventional banking procedures.
  • Loan available up to 90% of the principal amount of the deposits
  • Maximum loan of Rs 500 lakhs available 
  • Flexible loan tenure
  • Maximum loan tenure of 18 months

Eligibility for Loan Against Fixed Deposit

The following eligibility criteria apply for a loan against FD:

  1. The loan applicant must hold a FD with the bank with which he or she is applying for the secured loan
  2. All fixed deposit holders including joint fixed deposit holders.
  3. The applicant must be a resident of India, family trust, Hindu Undivided Family, associations, societies. Furthermore, sole proprietorships, group companies, and partnership firms can apply for the loan.
  4. A 5 year Tax Saving Fixed Deposit is not eligible for a loan
  5. A fixed deposit in the name of a minor is not eligible for a loan

Benefits of a Loan Against a Fixed Deposit

The following are the benefits of availing a loan against FD for an account holder. 

  1. While availing a loan against FD, you need not make a premature withdrawal of a FD. This way you can save the penalty interest on a premature withdrawal. 
  2. No processing Fee on the loan processing.
  3. Lower interest rate
  4. Easy and seamless process of loan processing
  5. The loan is available against domestic as well as NRI fixed deposits

Features of Loan Against FD

  • Lower interest rates — Because your fixed deposit is used as collateral for a loan, the interest rate on these loans is lower. The interest rates on these loans are typically 2 percent to 2.5 percent lower than personal loan interest rates. As a result, these loans’ equivalent monthly instalments (EMIs) are lower.
  • Lower Documentation – The bank already has your KYC formalities updated from when you opened your FD. Hence, the documentation required for a loan against your FD will be minimal. You will not be asked to submit papers such as proof of income, ITRs, or other tax returns again as the bank already possesses these details. 
  • Credit Score – The banks will check your credit score before offering you any type of loan (secured or unsecured). In the case of a loan against an FD, however, your CIBIL or credit score will not be taken into account while determining your eligibility. As a result, such loans can be a viable choice for persons with low credit or no credit. Many individuals do not have a credit score because they have not availed any facilities like credit cards, personal loans, etc. 
  • Loan Amount – If you need a personal loan, the maximum loan amount you may get will be determined by a variety of factors. Such factors are your credit score, income, duration, repayment schedule and so on. In the case of a loan against an FD, however, the maximum loan amount is determined by the amount of money you have in the FD account. This means that if you have a higher FD amount, you will be eligible for a larger loan.
  • Prepayment – When you pay off a loan early, the bank loses money on interest, so they will charge you a penalty. This is a usual practice followed by most of the banks in India. In the case of a loan against an FD there is no penalty on prepayment. This is because the bank does not lose money on the interest.

How to Obtain a Loan Against FD?

You can obtain a loan against FD either online or offline. Most of the banks allow their account holders to avail the loan online by logging into their internet banking. Such banks are HDFC Ltd, SBI Bank, Kotak Bank, Axis Bank, and so on. However, if the bank does not have an online facility then you can visit the nearest branch office. The process is very simple and seamless. You just need to submit a form along with the documents. The documents required are application form and FD receipt.

Frequently Asked Questions

Is it possible to take out a loan against my FCNR deposit?

Yes, you can get a loan against your Foreign Currency Non-Resident Account (FCNR) deposit from HDFC Bank, SBI Bank, Kotak Bank, and other banks. You can also get a loan based on your NRE and NRO deposits accounts.

What happens if I can’t pay the EMIs on the loan against FD?

If you don’t pay your EMIs, the bank will use the balance in your FD for the same.

I am a senior citizen. Can I apply for a loan against bank FD?

Yes, you can apply for a loan against your FD.

What are the fees associated with a loan against a fixed deposit?

There are no processing fees when taking out a loan against a savings or fixed deposit account. The rate of interest on loan is charged, which is usually 2% to 3% higher than the FD interest rate.

What is the time limit for repaying a loan against FD?

The loan against the fixed deposit must be repaid before the maturity of the fixed deposit. The due date of repayment of loan must not exceed the term of the fixed deposit.

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