Loan Against FD

A fixed deposit (FD) is a great way to save money and earn interest. But what if you need access to your money before the maturity date? That's where a loan against FD comes in.

A loan against FD (LAFD) is a secured loan that you can take against your fixed deposit. This means that you pledge your FD as security for the loan. The lender will then give you a loan of up to 90% of the FD value. The major benefits of a loan against FD include quick processing and disbursal, continued FD interest payouts, and no prepayment penalties.

Overall, a loan against an FD offers a source of funds in case of urgent needs while the FD keeps earning interest.

Loan Against FD Interest Rate

Before you apply for a loan against FD, it is important to consider the associated interest rates. Banks offer loans against fixed deposits at interest rates of 1-2% higher than the FD rate. Knowing the interest rates helps you determine the loan affordability and its impact on your overall financial strategy.

Here are the highlights of Loan Against FD:

Loan Type Secured Loan
Loan Amount 70% to 90% of tde FD value
Interest Rate 1% to 2% higher tdan FD rate
Collateral Fixed Deposit
Note: The loan amount and interest rates are subject to change based on your fixed deposit amount.

Top Banks Providing Loans Against FD

Loan against fixed deposit are secured loans as FD acts as the collateral. Many banks offer loans against FD at lower interest rates when compared to other loan options as they are secured loans. Here are some of the top banks providing loans against FD:

Top Banks Interest Rate Loan Amount
Axis Bank 2% above term deposit rate Rs.25,000 onwards
State Bank of India 1% above the relative FD rate Rs.25,000 to Rs.5 crore
HDFC Bank 2% above the FD rate Up to 90% of your fixed deposit
Federal Bank 2% above the FD rate Up to 90% of the deposit amount
Karur Vysya Bank 5% to 7% Up to 90% of the deposit amount

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Note: The loan amount and interest rates are subject to change based on your fixed deposit amount.

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Loan Against FD Eligibility Criteria

To qualify for a loan against your fixed deposit (FD), you must meet the following criteria:

Only Indian citizens are eligible for this loan facility.

You must hold a valid FD with the bank from which you wish to avail the loan. This includes both individual and joint FDs.

Hindu Undivided Families (HUFs) and Family Trusts are eligible for loans against FD.

Registered Clubs, Societies, and Associations are also eligible.

Sole proprietorships, group companies, and partnership firms registered under applicable laws.

Documents Required For Availing Loan Against FD

To apply for a loan against your fixed deposit (FD), please ensure you have the following documents readily available:

Duly completed and signed application form: This will have your personal details, loan requirements, and FD information.

Signed loan agreement: Review and understand the terms and conditions outlined in the loan agreement before signing.

Original fixed/term deposit receipts: Receipts duly discharged in favor of the lending bank, serve as the primary security for the loan.

Features & Benefits of Loan Against FD

Loans against FDs offer easy access to financing at affordable repayment costs, as the FD serves as collateral. The key advantages include better terms compared to other loan options and flexibility of operation. Here are the features and benefits of a loan against FD:

Lower Interest Rates: Lenders offer these loans at lower interest rates compared to unsecured personal loans, as the FD serves as collateral. This results in lower EMIs.

Minimal Paperwork: Minimum documentation is required as the FD itself acts as security for the loan.

No Credit Score Checks: Eligibility is determined based on the FD amount rather than the credit score. This helps applicants with low or no credit scores.

Loan Amount Depends on FD Value: The maximum loan amount sanctioned corresponds to the FD amount. A higher FD value means eligibility for a higher loan amount.

No Prepayment Penalties: Borrowers can foreclose the loan anytime with no penalty charges as banks face no interest loss in such loans.

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Loan Amount for Loan Against FD

The loan amount is generally a percentage of the fixed deposit value, and it can vary among different banks and financial institutions.

The formula can be expressed as:

Loan Amount = Percentage of FD Value × Fixed Deposit Amount

The percentage of FD value is usually around 70% to 90%, depending on the bank or financial institution.

Here's an example:

Suppose you have a fixed deposit of ₹1,00,000 with a bank that offers a loan against FD at 80% of the FD value.

Loan Amount = 0.80 × 1,00,000 = ₹80,000

In this example, you would be eligible for a loan amount of ₹80,000 against your fixed deposit of ₹1,00,000.

You can also check other secured loan options from below:

Loan Against Mutual Funds Loan Against Securities
Loan Against Shares Loan Against Car
Loan Against LIC Policy Loan on Credit Card
Loan Against Gold Loan Against bonds
Loan Against SGB Loan Against PF
Loan against PPF Loan Against Agricultural Land
Loan Against Property Loan Against Insurance Policy

How To Apply For Loan Against FD

The online process enables fast and paperless applications for loans against FDs. Check eligibility and documents required beforehand for smooth processing.

Here are the steps to apply for a loan against FD online (however, the steps will vary based on the lender platform):

1. Log in to Internet banking using your user ID and password.

2. Navigate to the fixed deposit section and choose the loan against FD.

3. Enter the loan details, such as the required loan amount, tenure, purpose, etc.

4. The application is processed online by the bank automatically.

5. You will receive notifications about loan approval status via email and SMS from the bank.

6. On approval, the loan amount gets credited to the account linked to the FD as per the selected tenure.

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Frequently Asked Questions

A loan against FD (LAFD) is a loan provided by banks using your fixed deposit as collateral.

Individuals holding a fixed deposit in the bank can apply for LAFD.

Typically 70-90% of the FD value, varying by the bank's policy.

No, the FD is used as collateral, so you won't earn interest on the pledged amount.

Interest rates vary but are generally lower than unsecured personal loans and the rates are usually 1% to 2% above the FD rate.

The tenure varies based on the lender and it's usually shorter than the remaining FD maturity period.

It offers quick funds without breaking the FD, maintaining investment benefits

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