A loan against a fixed deposit provides a practical way to access funds without breaking your investment. While some fixed deposits allow premature withdrawal subject to a penalty, taking a loan against your FD preserves the deposit’s maturity benefits and avoids the reduction in returns that comes with early withdrawal.
Rather than encashing the FD and losing interest, a loan against the FD uses the deposit as collateral. Depending on the bank or financial institution, you may be eligible for up to 90–95% of the deposit value as a loan. This makes it an efficient option when you need liquidity but want to keep earning interest on your deposit.
What Is Loan Against FD?
A loan against an FD is a secured credit facility where your fixed deposit serves as collateral. Because the lender holds a predictable and low-risk security, interest rates for these loans are generally lower than unsecured alternatives. You also typically continue to earn interest on the underlying FD during the loan period, allowing you to benefit from both access to funds and ongoing returns.
What Are the Eligibility Criteria?
Eligibility requirements are usually straightforward for loans against fixed deposits. Common criteria include:
- You must be a resident of India.
- Minors are not eligible to apply in their own name.
- Hindu Undivided Families (HUFs) may apply where permitted.
- Sole proprietorship businesses can apply.
- Partnerships or businesses run by multiple persons may apply, subject to lender policies.
- Tax-saving five-year fixed deposits are typically not eligible for such loans.
- The loan tenure cannot exceed the remaining tenure of the fixed deposit.
Note: Lenders may have specific documentation or additional conditions; check with your bank for exact requirements.
Why Consider a Loan Against FD?
Loans against fixed deposits offer several benefits that make them attractive in many situations:
- They are accessible even with average or limited credit history because the FD acts as security.
- Interest on the FD usually continues to accrue during the loan tenure.
- Interest rates on these loans are generally lower than unsecured personal loans.
- Application and disbursal are often faster and simpler, since the lender already holds the deposit.
- Compared with other secured loans, documentation and approval are typically straightforward.
However, there are important considerations before taking such a loan:
- Compare the loan interest rate with other financing options to ensure cost-effectiveness.
- Understand that if you cannot repay, the bank can liquidate the FD to recover dues.
- Clarify repayment terms—EMI amount, frequency, and consequences of missed payments—to avoid penalties.
- Check for processing fees, charges for part-prepayment or foreclosure, and other applicable fees.
- You cannot withdraw the FD amount while it is pledged as collateral until the loan is fully repaid.
Using a Loan Against Fixed Deposit Calculator
A loan against FD calculator can help you evaluate whether this credit product suits your needs. Key outputs and comparisons include:
- Maximum loan amount available against your FD
- Estimated monthly EMI and total repayment amount
- Comparison of interest costs against other loan options
- Optimal loan tenure that balances affordability and interest cost
By modeling different tenures and rates, you can decide whether a short-term or longer-term repayment plan is preferable and whether the loan fits your overall financial strategy.
FAQs on Loan Against FD
Will I continue to earn interest on my Fixed Deposit if it’s pledged as collateral for a loan?
Yes. In most cases you continue to earn interest on the fixed deposit while it remains pledged as collateral for the loan.
What is the process for repaying a loan taken against a Fixed Deposit?
Repayment is typically structured as EMIs across the chosen tenure, though some lenders may offer alternative repayment arrangements. Verify frequency, processing, and any penalties for missed payments with your lender.
What is the repayment tenure for a loan taken against a Fixed Deposit?
Tenure varies by lender and cannot usually exceed the remaining maturity of the fixed deposit. Confirm available tenures with your bank or financial institution.
Are there any types of deposits where loans against Fixed Deposits are not permitted?
Yes. Certain products, such as five-year tax-saving fixed deposits, are commonly excluded from loan eligibility. Check the terms of your FD and the lender’s policy.