Loans Against Fixed Deposits: Everything You Need to Know

A fixed deposit (FD) is a popular tool for investment among individuals in India. It provides guaranteed returns at a fixed rate of interest and is a low-risk investment option. Moreover, it is a reliable source of funds for those who need liquidity. Banks and financial institutions offer loans against fixed deposits, which is a convenient way of getting funds without breaking the FD. In this article, we will discuss everything you need to know about loans against fixed deposits.

What is a Loan Against Fixed Deposit?

A loan against fixed deposit is a loan provided by banks and other financial institutions to individuals who have a fixed deposit with them. In this type of loan, the fixed deposit acts as collateral against which the loan is provided. The loan amount sanctioned depends on the fixed deposit amount and the terms and conditions of the bank or financial institution.

How Does a Loan Against Fixed Deposit Work?

A loan against fixed deposit is a type of secured loan. This means that in case the borrower is unable to repay the loan, the bank or financial institution can recover the dues by liquidating the fixed deposit. The loan amount is usually a percentage of the fixed deposit amount and is determined by the bank or financial institution.

The interest rate for a loan against fixed deposit is usually lower than that of an unsecured loan. This is because the fixed deposit acts as collateral and reduces the risk for the lender. Moreover, the interest rate for a loan against fixed deposit is usually higher than the rate of interest offered on the fixed deposit.

The repayment terms for a loan against fixed deposit are usually flexible. The borrower can choose to repay the loan in lump sum or in installments. Moreover, partial withdrawal of the fixed deposit is allowed without affecting the loan amount or interest rate.

Benefits of Loans Against Fixed Deposits

There are several benefits of availing of a loan against fixed deposit, some of which are mentioned below:

Lower Interest Rates:

The interest rate for a loan against fixed deposit is usually lower than that of an unsecured loan. This is because the fixed deposit acts as collateral and reduces the risk for the lender.

No Need to Break the Fixed Deposit:

A loan against fixed deposit enables the borrower to get funds without breaking the fixed deposit. This means that the borrower can continue to earn interest on the fixed deposit.

No Credit Check Required:

As the fixed deposit acts as collateral, there is no need for a credit check while availing of a loan against fixed deposit.

Flexible Repayment Terms:

Immediate Funds:

A loan against fixed deposit is a quick and hassle-free way of getting funds. As the fixed deposit is already with the bank, the loan can be sanctioned quickly.

How to Avail a Loan Against Fixed Deposit?

The process of availing of a loan against fixed deposit is simple and hassle-free. It can be done by following the steps mentioned below:

Step 1: Visit the Bank or Financial Institution:

The borrower needs to visit the bank or financial institution with the fixed deposit receipt and identity proof.

Step 2: Fill in the Application Form:

The borrower needs to fill in the loan application form and submit it to the bank or financial institution.

Step 3: Choose the Loan Amount and Repayment Term:

The borrower needs to choose the loan amount and repayment term based on their requirements.

Step 4: Submit the Application Form with Fixed Deposit Receipt:

The borrower needs to submit the loan application form along with the fixed deposit receipt to the bank or financial institution.

Step 5: Loan Sanction and Disbursal:

The bank or financial institution will verify the fixed deposit and process the loan application. Once the loan is sanctioned, the funds will be disbursed to the borrower.

Things to Keep in Mind Before Availing a Loan Against Fixed Deposit

While availing a loan against fixed deposit is a convenient way of getting funds, there are certain things that the borrower needs to keep in mind. Some of them are mentioned below:

Interest Rate:

The borrower needs to compare the interest rates offered by different banks and financial institutions before availing of a loan against fixed deposit.

Loan Amount:

The loan amount sanctioned by the bank or financial institution depends on the fixed deposit amount. The borrower needs to choose the loan amount based on their requirement.

Repayment Term:

The borrower needs to choose the repayment term based on their financial position and repayment capacity.

Prepayment Charges:

Some banks and financial institutions charge prepayment charges if the borrower chooses to repay the loan before the end of the term. The borrower needs to keep this in mind while availing of a loan against fixed deposit.

Penalty Charges:

If the borrower fails to repay the loan on time, penalty charges may be applicable. The borrower needs to make sure that they repay the loan on time to avoid penalty charges.

Where Can You Avail Loans Against Fixed Deposits?

Banks:

Several banks in India offer loans against fixed deposits. The loan amount sanctioned by banks varies from one bank to another. The interest rate offered on loans against fixed deposits is usually lower than that of an unsecured loan. Banks also offer flexible repayment terms for loans against fixed deposits. Some banks allow partial withdrawals from the fixed deposit account without affecting the loan amount. Borrowers can compare the loan terms and choose the bank that suits their needs the most.

Non-Banking Financial Companies (NBFCs):

Non-banking financial companies (NBFCs) also offer loans against fixed deposits. They offer quick and hassle-free loan processing and flexible repayment options. NBFCs offer competitive interest rates and loan options that are tailored to meet the borrower’s requirements. The loan amount sanctioned by NBFCs usually depends on the value of the fixed deposits.

Online Lenders:

In recent years, several online lenders have emerged in the market that offers loans against fixed deposits. These lenders offer quick loan processing and flexible repayment terms. Borrowers can apply for loans online and get the funds disbursed within a few hours. Online lenders also offer competitive interest rates and the option to repay the loan early without attracting any penalty charges.

Mobile Applications:

Several financial institutions have launched mobile applications that allow borrowers to avail of loans against fixed deposits. Bajaj Finserv app is a popular mobile application that offers loans against fixed deposits. The app has a simple user interface that allows borrowers to apply for loans quickly. The loan amount sanctioned by the app depends on the value of the fixed deposit. Bajaj Finserv app offers competitive interest rates and flexible repayment options. Borrowers can also track their loan status and repayment schedule on the app.

Credit Card:

Some credit card companies offer loans against fixed deposits. The loan amount sanctioned by credit card companies depends on the value of the fixed deposit. Interest rates offered on loans against fixed deposits by credit card companies are usually higher than those offered by banks and NBFCs. But, borrowers can enjoy instant approval and transfer of funds to their credit card account.

Several financial institutions and banks offer loans against fixed deposits. Borrowers can compare the loan terms and choose the one that meets their requirements the most. Bajaj Finserv App is a popular mobile application that allows borrowers to avail of loans against fixed deposits. The app offers competitive interest rates and flexible repayment options. Borrowers can apply for loans quickly using the simple user interface of the app. This app allows customers to apply for loans against their FDs without the need for lengthy paperwork or branch visits. In just a few clicks, you can get the funds you need to fulfill your financial requirements.

Conclusion

Loans against fixed deposits are a hassle-free way of getting funds without breaking the fixed deposit. It is a low-risk investment option and provides guaranteed returns at a fixed rate of interest. Moreover, it is a convenient and reliable source of funds for those who need liquidity. However, the borrower needs to keep in mind certain things while availing of a loan against fixed deposit. They need to choose the loan amount and repayment term based on their requirements and keep an eye on the interest rates and penalty charges.

There are several options available to avail loans against FDs, including banks, NBFCs, online platforms, and credit card companies. One of the best ways to get a loan against an FD is through the Bajaj Finserv App, which offers quick approvals, fast disbursals, and competitive interest rates. Customers must compare multiple options and choose the lender that offers the most competitive interest rates and flexible loan repayment options.