Loan Against FD: Everything You Need to Know Before Borrowing

A Loan Against FD lets you borrow up to 90%-95% of your fixed deposit at a low-interest rate. This secured loan is ideal for emergencies and offers quick approval without a credit check. Learn about eligibility, interest rates, and the application process. Compare top banks and their loan terms before applying. Read our complete guide to make the best financial decision.

By Praveen Singh
Published on
Loan Against FD: Everything You Need to Know Before Borrowing
Loan Against FD

A Loan Against Fixed Deposit (FD) is a financial tool that allows individuals to borrow money using their fixed deposit as collateral. This is a great way to access funds without breaking the FD and losing out on interest earnings. In this article, we’ll cover everything you need to know about loans against FD, including eligibility, interest rates, benefits, and a step-by-step application guide.

Loan Against FD Everything You Need to Know

FeatureDetails
Maximum Loan AmountUp to 90%-95% of FD value
Interest Rate1%-2% higher than FD rate
Repayment TenureLinked to FD tenure, usually shorter or equal to FD duration
Processing FeesTypically zero or minimal
EligibilityIndividuals, businesses, HUFs with FD in the lending bank
CollateralFixed Deposit is pledged as security

A Loan Against FD is a smart way to access cash without breaking your FD. It offers low-interest rates, fast processing, and flexible repayment. Before applying, compare interest rates and terms across banks to make an informed decision.

What is a Loan Against FD?

A Loan Against Fixed Deposit (FD) is a secured loan where your fixed deposit acts as collateral. Instead of withdrawing your FD prematurely and losing out on interest, you can get a loan at a low-interest rate while your FD continues earning returns.

Many banks and financial institutions in India, including SBI, HDFC, ICICI, and Axis Bank, offer this facility with minimal documentation and quick approvals.

see also: How to Take a Cheap Loan from Post Office RD

Why Choose a Loan Against FD?

If you need urgent cash, a Loan Against FD is a better alternative to personal loans or credit cards due to its lower interest rates and hassle-free approval process.

Benefits of Loan Against FD:

  • Lower Interest Rates: Compared to personal loans (10%-24%), a loan against FD is available at just 1%-2% above your FD rate.
  • No Credit Score Check: Since your FD is collateral, banks do not check your credit score before granting the loan.
  • Quick Disbursal: Most banks offer instant approval and disbursal through net banking.
  • No Processing Fees: Many banks waive off processing fees, reducing borrowing costs.
  • Flexible Repayment: Repay in EMIs or as a bullet repayment (full amount at once).
  • Continued FD Interest: Your FD continues earning interest even after being pledged.

Who Can Apply for a Loan Against FD?

  • Individuals: Account holders with an FD in the lending bank.
  • Businesses & HUFs: Companies, partnerships, and Hindu Undivided Families (HUFs) can also apply.
  • Senior Citizens: Eligible if they have an FD in their name.
  • Minors: A loan cannot be availed against a minor’s FD.

Interest Rates and Loan Limits

Interest rates on a Loan Against FD vary across banks. Here’s a quick comparison of major banks:

BankLoan AmountInterest Rate (Above FD Rate)
SBIUp to 90% of FD1%
HDFC Bank₹25,000 to 90%2%
ICICI BankUp to 90% of FD1.5%-2%
Axis BankUp to 85% of FD2%
Punjab National BankUp to 90%1%

Example Calculation:

  • If you have an FD of ₹5,00,000 earning 6% interest, you can get a loan of up to ₹4,50,000 at an interest rate of 7%-8%.

How to Apply for a Loan Against FD?

Step-by-Step Process

1. Online Application (Net Banking)

Most banks offer instant loan approval via net banking. Follow these steps:

  • Log in to your net banking account.
  • Navigate to the Loan Against FD section.
  • Select the FD account you want to pledge.
  • Choose the loan amount.
  • Accept the terms & conditions and submit the request.
  • The loan is credited instantly to your account.

2. Offline Application (Bank Branch)

If you prefer an offline process:

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  • Visit your bank with your FD receipt & KYC documents.
  • Fill out the loan application form.
  • The bank will mark a lien on your FD.
  • Loan is sanctioned within a few hours.

Repayment Options for Loan Against FD

  • EMI-Based Repayment: Pay in easy monthly EMIs.
  • Lump Sum Payment: Repay the entire loan at once.
  • Interest-Only Payments: Some banks allow you to pay only interest until FD maturity.

Is a Loan Against FD a Good Idea?

A Loan Against FD is an excellent option if:

  • You need emergency funds but don’t want to break your FD.
  • You want a lower interest loan instead of a high-interest personal loan.
  • You need quick cash without credit checks.

When Not to Take a Loan Against FD:

  • If you don’t need urgent funds, withdrawing FD might be simpler.
  • If your FD is earning low interest, another loan might be more beneficial.

see also: Big earning on 2 lakhs! SBI or post office, where will you get the highest interest?

Loan Against FD Everything You Need to Know FAQs

1. What happens if I don’t repay my Loan Against FD?

If you fail to repay, the bank will liquidate your FD to recover the loan amount.

2. Can I take a Loan Against FD from a different bank?

No, you can only get a loan against an FD held with the same bank.

3. Is there any penalty for early repayment?

Most banks do not charge prepayment penalties, but check with your bank.

4. Can NRI Fixed Deposits be used for loans?

Yes, NRO and NRE FDs are eligible, but terms vary by bank.

5. Is a Loan Against FD better than a Personal Loan?

Yes, because the interest rates are lower, and approval is instant.

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