Need money urgently but don't want to break your fixed deposit prematurely? A loan against FD (Fixed Deposit) lets you use your FD as collateral while retaining their investment benefits. It is one of the most convenient and affordable loan options available in India, offering the benefits of both liquidity and growth.
This comprehensive guide will help you to get a loan against a fixed deposit.
Eligibility Criteria for Loan Against Fixed Deposits
To be eligible to avail a loan against FD, applicants must comply with the guidelines set by financial institutions (which can vary between financial institutions). Here are some of the eligibility criteria for a loan against fixed deposit:
- Applicants must be over 18 years old
- Salaried individuals, self-employed professionals, and businessmen are eligible
- Minimum FD amount should be ₹5000
- FD must have been opened at least 3-6 months prior
- FD receipt should be marked as a guarantee in the bank's favour
Financial institutions offer high-value loans of 70-80% against FDs based on factors like the FD principal amount, deposit tenure, applicant's creditworthiness, and loan purpose. The repayment period ranges from 12 months to 5 years via EMIs. Some banks and NBFCs also provide an overdraft facility, where interest is paid monthly only on the withdrawn amount.
Disclaimer: The exact eligibility criteria may vary across banks and financial institutions. Customers are advised to check with their respective bank/financial institution directly regarding the specific eligibility criteria and terms & conditions applicable for a loan against FD before availing the facility.
Documents Required for Loan Against FD
When applying for an FD loan, ensure you have the following documents ready:
- Properly filled loan application form
- Identity proof - Aadhaar, PAN Card, Voter ID, Driving Licence
- Address proof - Aadhaar, Voter ID, Electricity bill, Rent agreement
- Bank account statements - Latest 6 months statement
- Form 15G/H for exemption of TDS on interest, if applicable
- FD receipts of deposit to be pledged for the loan
How to Apply for a Loan Against FD
Follow these steps to apply for a hassle-free loan against FD:
Fill out the Loan Application Form
- Visit your preferred bank or financial institution or you could just download the application form online.
- Complete the form with your personal and financial details. Ensure all information is accurate.
Submit Documents
- Submit the application form along with photocopies of your KYC documents and proof of income as required by the bank.
- Provide the original FD receipt that you are pledging as collateral.
Loan Disbursal
- Once approved, the loan will be disbursed.
Overdraft Facility on FD
An overdraft facility against FD allows you to borrow up to 70-90% of your fixed deposit value without breaking it. Interest is only charged on the amount used, and the FD continues to earn interest. The interest rate is lower as the loan is secured, with flexible repayment options.
Preclosure and Renewal of Loan Against FD
You can pre-close the loan by paying the outstanding principal, interest, charges, etc., in one payment before the end of the tenure.
You can renew the Loan Against FD. This renewal is subject to the terms and conditions set by the bank or financial institution where you have the FD and loan. Generally, the renewal process must be initiated before the maturity of the existing loan against the FD. Typically, financial institutions may require that any outstanding loan amount be settled before renewing or extending the loan.
Conclusion
Loans against fixed deposits offer the dual benefit of meeting immediate funds needs while continuing to grow your savings. By pledging your idle FDs as collateral instead of breaking them prematurely, you can get access to money at affordable interest rates and with minimum hassles. Follow the guide outlined here and you can get approved for the loan quickly without risking your deposits.
