Loan against Fix Deposit (FD) – Is it good

Last couple of years have been really difficult for all of us. Corona not only led to personal losses of near and dear ones but most of also went through financial crisis.

Many people lost jobs, few had to shut shops and in turn we all had to avail loan. Generally we had to go for loan against credit card or Personal loans both of which are high interest rate loans.

So is there a better option?

Loan against Fix Deposit is good alternative to personal loan. Since bank has security of loan amount in form of your Fix Deposit, this loan falls under secured loan category.

Secured loans are always cheaper for customers compared to non secured loans. You can expect much less interest rate than any unsecured loan like personal loan.

Advantage of loan against Fix Deposit

  • Low rate of interest
  • Little paperwork
  • Very fast – Just walk in to your branch with FD and walkout with loan
  • Online loan possible if FD is booked online
  • No guarantor ( except your FD)
  • No need to break FD
  • Win win for bank and customer

Features of loan against Fix Deposits

  • Generally around 80% of FD is loan amount ( some banks give up to 90%)
  • Flexible – Banks offer pay as you use offer. So you are eligible for say 80% of FD but you can choose how much to use on need basis and pay as you use
  • Need to submit FD as bank guarantee which bank can liquidate if you fail to repay.

Drawbacks of loan against FD

  • Rate of interest is higher than what we earn from FD. If FD is available at say 6%, interest rate on loan would be 7-8 %

Overall I feel this is good alternative to personal loan as long as your intention is to pay back loan sincerely.

So next time you think of personal loan, do first check your Fixed Deposit.

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