How Does the Loan Against Fixed Deposits Work?


  • Looking to opt for a loan against a fixed deposit? Want to know how it works?
  • Know about this and the top lenders that offer the same!

Life is full of ups and downs. There come some situations in your life when you face a liquidity crunch and you need immediate funds to recover from it. For this, you can opt for a personal loan, gold loan, or any other secured loan. But what if you don’t qualify the income eligibility criteria for getting a personal loan or you have a poor credit score or worst, you don’t have any assets like gold or property against which you can get a secured loan? In such times, a loan against fixed deposits comes to your rescue like nothing else.

Many lenders provide a loan against fixed deposits to meet your short-term fund requirements. Also, the interest rates are much lower than a personal loan which is an unsecured loan whereas a loan against a fixed deposit works as a secured loan. Your fixed deposit in the bank works as the pledged security as the lender can fall back on it in any case you default or you fail to repay the loan back. So if you want to know how a loan against fixed deposit works, we can help you decode it. We will tell you everything about it so that you can decide better about availing this type of loan. So, read on!

What is a Loan Against Fixed Deposit and What are its Features?

A loan against fixed deposits lets you avail the required funds from the lender against the amount you have deposited for a fixed period. So automatically, the loan amount will depend on the value of your Fixed Deposit. Usually, lenders give loan amounts up to 80%-90% of the total value of your FD. It also depends on the nature of the relationship you have with your lender. For example, you have a fixed deposit of INR 4,00,000 in the bank, so based on this, you can get a maximum loan amount of INR 3,20,000-3,60,000.

The interest rates are much lower than a personal loan clearly because of it being a secured loan. The rate generally ranges from 1% to 2% higher than the interest rate you are receiving on your fixed deposits. Hence, your EMIs will automatically be lower as in a personal loan.

The best thing about a loan against a fixed deposit is that it saves you from withdrawing your FD prematurely and instead of this, it provides a loan against the said deposit. During this process, you will keep earning interest on your fixed deposit. Withdrawing or breaking your FD prematurely can also make you pay penalty charges and also you may end up getting a lower return value on it.

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Now, if you are thinking about the tenure for which you will get the loan against your fixed deposit, you must remember that the tenure of your personal loan can not exceed the residual tenure of your FD. There are some other features of it that you can see.

  • The disbursal time of this kind of loan is pretty fast. The loan amount will be transferred to your bank account within 24 hours.
  • To get this loan, you will not need to submit any kind of documents to show your income such as salary slips or Income Tax Returns (ITR). The whole documentation in the process will be minimal.
  • Unlike a personal loan where your loan amount depends on your age, income, job type, credit score, etc, the only thing that affects your loan amount in a loan against FD is the overall value of your fixed deposit.
  • In case you want to prepay your loan against FD, lenders will not charge any prepay charges as lenders do not lose any interest amount. However, lenders charge a one-time processing fee on this facility.

How to Apply for Loan Against Fixed Deposits?

To apply for a loan against fixed deposits, you only need one document which makes the process quite easy and hassle-free. When you apply for it, submit the application form along with the receipt of your fixed deposit duly settled in favor of the lender. The loan amount will be credited to your account within 24 hours of submitting the application.

Eligibility Criteria for Availing for a Loan Against Fixed Deposit

The eligibility criteria are much lenient as compared to a personal loan. If you want to apply for a loan against FD, you must come under the following categories –

  • A resident citizen of India
  • Sole Proprietorship Firm
  • Partnership Firm
  • Hindu Undivided Family (HUF)
  • Family Trust
  • Group Company, Club, Association, or Society

Top Lenders that Provide Loan Against Fixed Deposits in India

After gaining some useful information about how the loan against fixed deposit works, it is important to know some of the top lenders that provide the same in India. We are giving you information about them so that you could choose the most suitable one for you.

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Axis Bank Loan Against FD

Axis Bank is one of the leading private lenders offering some of the best financial products to its customers. Axis Bank can disburse upto 85% of fixed deposit value as the loan amount. The minimum loan amount that you can opt for is fixed as INR 25,000. The interest will only be on the utilized amount and for the period you used that amount through the overdraft facility.

There are no prepayment charges applicable to borrowers. Thinking about the interest rate on the loan? Well, it would be just 2% above the deposit rate.

State Bank of India  (SBI) Loan Against FD

State Bank of India is the largest lender of our country due to its pan India presence and high business volumes. A loan against FD is one such financial product that you can opt for in case of any emergency. With an interest rate of 1% above the deposit rate, you can get upto 90% of your FD value as the loan amount. It can go upto as much as INR 5 crore if you decide to opt for an online overdraft against FD, while the minimum remains as INR 25,000.

There is no processing fee and prepayment charges on this facility. Also, you need to know that interest is charged on a daily reducing balance. You can apply for it through both online and offline methods.

ICICI Bank Loan Against FD (Available Against NRO, NRE and FCNR Deposits)

When we talk about the list of top private banks in India, it is impossible not to mention the name of ICICI Bank in this list. ICICI can provide you a loan at upto 90% of your total FD value. The maximum loan it can give amounts to INR 500 lakh. The liquidity part in your investment can get you out from the tough situation in an easy way. This loan facility can also be opted by third party individuals at affordable interest rates so that you can repay the amount easily. The loan amount will be disbursed in the form of demand loan or overdraft against deposit.

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Punjab National Bank Loan Against FD (Available Against NRO, NRE and FCNR Deposits)

Punjab National Bank also provides individuals an opportunity to avail the loan against the term deposits at lower interest rates. The one thing here is to remember that the loan amount will be dependent on the maturity period left in your term deposit. For example, if the maturity period is upto 2 years, the margin will be 5%, which means you will get upto 95% of the FD value as the loan amount.

Suppose that you have a maturity period of upto 5 years left, you will get upto 80% of the FD value as the total loan amount. So, you need to keep this factor in mind while opting for a PNB loan against fixed deposit.

Bank of Baroda Loan Against Fixed Deposit

Bank of Baroda loan against FD could be the best option for you as you can utilize your money deposited in the bank to get the required funds at lower interest rates. You can use your deposited money to get yourself out from the financial crunch you are facing right now. There will be no processing fee and you will only need to submit your FD receipt to apply for the said loan facility. So, choose it now and get a loan that can be as much as 95% of  your fixed deposit (principal + accrued interest credited to the account).

Federal Bank Loan Against FD

Federal Bank, one of the top private lenders of our country, provides loans against fixed deposits. You can get upto 90% of your FD value as the loan amount, so you can see it clearly depends on your FD value. By opting for this facility, you will not have to pay any kind of processing fees or penalty charges in case you want to pay off the loan before the tenure. You need to remember that you can get the loan only against those deposits which are free from any lien or restraint.

So, these are some options that you can choose from. Nevertheless, opting for a loan against a fixed deposit is always a good option as it also provides you a certain credit mix in your profile as this is a secured loan.

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Personal Loan Interest Rates October 2023
Fullerton India12.00% - 24.00%
HDFC Bank10.75% - 14.50%
ICICI Bank10.75% - 19.00%
IndusInd Bank10.25% - 26.00%
Kotak Bank10.99%
RBL14.00% - 23.00%
Standard Chartered Bank11.49%
Tata Capital10.50% - 24.00%
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Axis Bank8.75% - 9.15%
Bank of Baroda8.50% - 10.60%
Citibank8.75% - 9.15%
HDFC8.50% - 9.40%
ICICI Bank9.00% - 9.85%
Indiabulls Housing Finance Limited8.65%
Kotak Bank8.85% - 9.40%
LIC Housing8.50% - 10.50%
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PNB Housing Finance8.50% - 10.95%
Reliance Home Finance8.75% - 14.00%
State Bank of India/SBI9.10% - 9.65%
Tata Capital8.95% - 12.00%