What is the Interest Rate for a Loan on a Fixed Deposit?
Last Updated : Aug. 5, 2020, 4:20 p.m.
The interest rate may be the first thing you could notice when you apply for a loan. And the reason for this is simple. Borrowers need a loan that comes with a low interest rate and puts less burden on their repayment. And for a low interest rate, secured loans are the best choice for you. A type of secured loan which is used by most of the customers is the loan on a Fixed Deposit . Using this, you can borrow upto 80%-90% of your FD value. However, the loan quantum can vary based on the lender you choose. Coming back to the interest rate on this loan type, how much will it be? Well, the rate of interest depends on the individual current FD interest rate on the deposit and credit history. Read this post to know more about it.
Factors Affecting the Interest Rate of Loan on a Fixed Deposit
Fixed Deposit Interest Rate: The bank charges an interest rate to your loan amount based on your FD interest rate. Normally, the interest rate for a loan on a fixed deposit is 1%-2% above the FD rate. To understand it better, refer to the example below.
Suppose you have FD of INR 5 lakh, and the bank provides you a loan amount up to 90% of your FD. That means you can borrow a maximum loan of INR 4.5 lakh from the bank. The current interest rate on your FD is 6.00%, so your loan interest rate would most likely be 7%-8% per annum. The loan on a Fixed Deposit helps you meet the financial needs at an affordable rate.
So, check your interest rate of Fixed Deposit whenever you apply for a loan against the same.
Credit History: Your credit history can also influence the interest rate on a loan against fixed deposit . So, if your credit history is good, you can get the rate reduced further. A good credit history results when you have paid the loan EMIs and credit card bills on time for long.
Interest Rates of Top Banks for a Loan on a Fixed Deposit
| Bank | Loan Amount | Interest Rate |
|---|---|---|
| SBI | INR 25,000 to 5 Crore | 1% above 2.90% - 6.20% |
| HDFC Bank | Upto 90% of the FD Value | 2% above 2.50% - 6.25% |
| ICICI Bank | Upto 90% of the FD Value | 1% above 2.50% - 6.30% |
| Axis Bank | Upto 85% of the FD Value | 2% above 2.50% - 6.50% |
| YES BANK | Upto 90% of the FD Value | 3.25% - 7.25% |
| Bank of Baroda | Upto 95% of the FD Value | 1.75% above 2.90% - 6.30% |
| Bandhan Bank | Upto 90% of the FD Value | 1.50%-2.00% above 3.00% - 5.75% |
| Canara Bank | Upto 90% of the FD Value | 1% above 2.90% - 5.75% |
Features of a Loan on a Fixed Deposit
- Attractive Rate of Interest: Loan against fixed deposit comes at an attractive rate of interest. It is because the loan against FD is a secured loan
- No Credit History Required: You can borrow a loan on a fixed deposit even if you don’t have a credit history.
- Zero Processing Fee: Unlike any other loan, you don’t need to pay a processing fee for your loan on a fixed deposit.
- Earn on FD: The borrower can still earn interest on his or her fixed deposit even after borrowing a loan against the deposit amount.
- No Prepayment Fee: If you want to pay off the loan early, you can do so without having to pay a fee for it, much unlike unsecured loans where one needs to pay the prepayment penalty.
Apply for a Loan on a Fixed Deposit
To borrow a loan against your Fixed Deposit, you can visit the nearest bank branch. Ask for a loan against FD. Fill the loan application form and submit it to the bank. The loan amount will be disbursed to your bank account without any hassle as soon as the lender approves the said transaction. You can also apply for the loan online by using the net banking facility.