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What are the Advantages of a Loan on a Fixed Deposit?

Highlights

  • Want to know about the benefits that you can enjoy by loan on a Fixed Deposit?
  • Read on to know more about benefits such as low-interest rates, higher loan amounts, lenient eligibility criteria, etc!

Are you facing a sudden liquidity crunch currently and looking to get funds as soon as possible? Do you know that your fixed deposits could be one of the amazing assets against which you can get the required loan amount? Yes, with the help of Loan on a Fixed Deposit, you can overcome any financial stress you are facing currently and, that too, at affordable interest rates. This is one of the amazing loan facilities provided by most banks and financial institutions with which you can easily get the loan amount.

The best thing about a loan on a fixed deposit is that your investment remains as it is and you don’t need to withdraw the amount prematurely with low returns. Instead, you can get the required loan amount against your deposits. There are several advantages that an individual can enjoy by availing the loan on a fixed deposit. If you are someone who is looking to get his/her needs fulfilled by opting for this loan facility and want to know about all the benefits of it, this post is for you!

We are providing all the advantages of a loan on a fixed deposit below in detail. You can have a look at them!

Lower Interest Rates

One of the major reasons that so many individuals opt for the loan on a fixed deposit is the lower interest rates on the facility. As it is a secured loan which means that your Fixed Deposits (FD) will work as a security or collateral against the loan amount you will be getting. That’s why the interest rates are much lower as compared to other unsecured loans.

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Generally, lenders offer 1% to 2% per annum interest rates above the interest rates receivable on your FD scheme. So it may change from one lender to another according to the interest rates they are providing on their FD.

Higher Loan Amount

You can get upto 80% to 90% of the total FD value as the loan amount. So you can see, the loan amount will depend on the value of your Fixed Deposit. Higher the FD amount will be, the higher your loan amount will be. Other than the FD Value, it also depends on the nature of the relationship you have with your lender.

For example, you have a fixed deposit of INR 6,00,000 in the bank, so based on this, you can get a maximum loan amount of INR 4,80,000 to INR 5,40,000. Also, your FD will remain intact as before.

Flexible Tenure

You must be thinking about the tenure of the loan on a fixed deposit? Well, it is one of the highlights of this loan facility, as you can choose a tenure upto a period till your Fixed Deposit gets matured. It cannot be above your FD tenure in any case. Having such a flexible and long tenure, you can repay the loan amount easily with the help of easy EMIs or an Interest-only facility at your convenience.

Overdraft Facility

Most lenders also provide an Overdraft facility on the Loan against on Fixed Deposit. With this facility, a fixed loan amount will be transferred to your savings or current account, and you will only need to pay the interest on the utilized amount. Suppose you get an overdraft facility of INR 4 lakh and you require only INR 2 lakh, so the interest will be charged on the latter amount only.

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No need for Credit Score and Minimum Monthly Income

There are a lot of individuals who cannot get the loan amount due to low CIBIL Score and low income. For getting a loan on FD, you don’t need to fulfill any such criteria. You just need to have a Fixed Deposit in the bank and you can get the loan facility without any trouble. This is one of the reasons that so many people opt for the same.

No Documentation and Quick Disbursal

The best thing about the loan on a fixed deposit is that you can get the required loan amount in your bank account in a hassle-free manner due to no documentation. As the lender already has all your KYC details, you will not need to submit any other documents. You can get the funds in your account within 24 hours as soon as the authentication process is completed.

Processing Fee and Other Charges

One of the sheer advantages of this loan on a fixed deposit facility is that you don’t need to pay any kind of processing fee to get the loan amount in your account. This helps you in reducing the overall cost of the borrowed loan amount. Also, you don’t need to pay additional charges such as foreclosure/prepayment charges on this loan facility. You can pay the loan amount at any point in your tenure.

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Fullerton India14.00% - 33.00%
HDFC Bank10.75% - 21.45%
ICICI Bank10.75% - 18.49%
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RBL17.50% - 24.00%
Standard Chartered Bank11.00% - 15.00%
Tata Capital10.99% - 18.00%
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Axis Bank7.75% - 8.55%
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Citibank8.20%
HDFC6.90% - 7.65%
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Kotak Bank7.20% - 9.30%
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