How Does a Loan Against a Fixed Deposit Work?

A loan against a Fixed Deposit (FD) works as follows:

• Collateral: The FD is used as collateral for the loan. The FD remains with the financial institution during the loan tenure.
• Loan Amount: The amount available for borrowing is usually a percentage of the FD’s value. This percentage varies depending on the institution’s policies and the type of FD.
• Interest Rate: Interest rates on loans against FDs are generally lower compared to other types of unsecured loans because the FD is used as security.
• Repayment: Repayments are made per the agreed terms, with interest charged on the loan amount. The FD continues to earn interest during the loan period.
• Impact on FD: The FD’s maturity and interest earnings remain unaffected by the loan.

For specific details, it is recommended to consult with the financial institution.