Loan Against FD: What It Is, Who Can Apply, Interest Rates & Full Guide

When you’re in urgent need of funds, breaking your Fixed Deposit (FD) isn’t always the smartest move. That’s where a Loan Against FD steps in—letting you access quick money without sacrificing your hard-earned savings. In fact, it’s one of the most convenient and affordable ways to borrow, especially if you’re already invested in an FD with a bank.

Whether you’re a student, working professional, senior citizen, or small business owner, this financial tool can come in handy. But how exactly does it work? Who is eligible? And what kind of interest rates are we talking about?

Loan Against FD: Interest Rates & Full Guide

Feature	Details
What is it?	A secured loan taken by pledging your Fixed Deposit (FD) as collateral
Who can apply?	Individuals, firms, companies, HUFs with a valid FD account (excluding tax-saving FDs)
Loan amount	Up to 90–95% of the FD value
Interest Rate	Typically FD interest + 1% to 2%
Tenure	Same as the FD maturity period
Processing Fees	Often zero or minimal
Credit Score Needed?	Not required, as it’s a secured loan

A Loan Against FD is one of the most reliable, low-cost, and hassle-free ways to get instant funds without breaking your savings. Whether it’s an unexpected medical expense, a temporary cash crunch, or even a business need, this option gives you financial flexibility while keeping your investment intact.

What is a Loan Against FD?

A Loan Against Fixed Deposit (FD) is a type of secured loan where your existing FD acts as collateral. Instead of liquidating your deposit during a financial crunch, you borrow against it—your money stays invested, continues earning interest, and you get the cash you need.

It’s like borrowing money from your future self—smart, low-risk, and cost-effective.

Example:
Let’s say you have an FD worth ₹5 lakh at 7% interest. Instead of breaking it early, you can borrow up to ₹4.5–₹4.75 lakh (around 90–95%) as a loan, usually at 8–9% interest. Your FD keeps earning while your loan helps with immediate needs.

Who Can Apply for a Loan Against FD?

Good news—most FD holders are eligible! Here’s a quick look at who can avail of this facility:

Eligible Applicants:

Individuals (single/joint FD holders)
Sole proprietorships & partnership firms
HUFs (Hindu Undivided Families)
Companies, trusts, associations, societies
Senior citizens with special FD schemes

Not Eligible:

Minors (under guardian FDs)
FDs under tax-saving schemes (due to the 5-year lock-in period)

Tip: Always check with your bank about their specific eligibility norms, especially for joint accounts or special FDs.

Interest Rates on Loan Against FD

The interest rate for a Loan Against FD is usually 1% to 2% higher than your FD rate.

Bank	FD Rate	Loan Against FD Rate
SBI	6.5%	7.5% to 8.5%
HDFC Bank	7%	8% to 9%
ICICI Bank	6.75%	7.75% to 8.75%
Canara Bank	6.85%	Up to 8.85%

This makes it cheaper than a personal loan, which may come with interest rates of 10%–20% depending on your credit score.

How Much Can You Borrow Against Your FD?

Most banks offer loans of up to 90–95% of the FD’s value. Some private banks may even offer slightly more, depending on your relationship with them.

Minimum Loan: ₹10,000 (varies by bank)
Maximum Loan: No fixed limit (depends on FD amount)

You can get the loan either as:

Term Loan: One-time disbursement with fixed EMIs
Overdraft: Withdraw as needed up to the limit; pay interest only on used amount

Repayment Tenure and Terms

Loan Tenure = FD Tenure
The loan must be repaid before or on the FD maturity date.
Flexible Repayment:
Choose EMI or lump sum repayment depending on your financial comfort.
Premature Closure:
If you close the FD early, the loan is adjusted from the proceeds.
No Prepayment Penalty:
Most banks allow early repayment without any charges.

How to Apply for a Loan Against FD – Step-by-Step

Applying is simple—and you can do it online or offline.

Online (via net/mobile banking):

Log in to your bank’s net/mobile banking portal.
Select “Loan/Overdraft against FD” from loan options.
Choose the FD you want to pledge.
Enter loan amount and tenure.
Confirm and submit.

Offline (bank branch):

Visit the branch with your FD receipt.
Fill out a loan application form.
Submit basic KYC documents.
Bank marks a lien on the FD.
Loan is sanctioned (usually within 24–48 hours).

Tip: You can continue receiving FD interest payouts during the loan period if it’s a non-cumulative FD.

Advantages of Loan Against FD

Low Interest Rates: Cheaper than personal loans or credit cards.
No Credit Check: Ideal if you have no credit history or a low score.
Quick Disbursal: Instant approval for existing FD customers.
No Processing Fees (in most cases): Extra savings for the borrower.
Retains FD Benefits: You earn interest on your FD even while using the loan.
Flexible Repayment: EMI or overdraft—choose what suits you.

Things to Keep in Mind

FD Will Be Lien Marked: You cannot withdraw or break the FD until loan closure.
Loan Cannot Be Renewed Beyond FD Maturity: Plan your repayment accordingly.
Default Consequences: If you don’t repay, the bank can adjust your FD to recover dues.
Tax-Saving FD Not Eligible: No loans allowed on 5-year tax-saving deposits.