Home Loan

Complete Guide on How to Take a Loan against Fixed Deposit to Buy a New Home


Thinking of buying a new home? It is more challenging than it seems, as there are so many things you need to take care of. You can’t buy a house easily as there are a lot of procedures that take place. 

A home loan is common among people who wish to buy a home. Hence, if you are considering getting a loan, you might get a loan against a fixed deposit.

When it comes to FD, provides you with many benefits. You can apply for a loan by leveraging your fixed deposit, making it one of FD’s best features. When you plan to get any loan, a lot of paperwork is included. Minimum paperwork is required with a loan against a fixed deposit. 

The interest rate provided by the bank on a loan against FD is generally lower than that on a traditional loan. Moreover, you are not even required to pay the prepayment penalty. You can easily get a home loan against a fixed deposit online. You need to have access to a net banking account.

Now have a look at what a fixed deposit is. 

What Is a Fixed Deposit?

A fixed deposit (FD) is an investment feature that banks provide to their customers to build their savings up to a period and, in return, provides them with assured returns. Here is an example for you.

Suppose you want to make an FD and deposit 10,000 rupees in your bank account for four years. Now, after four years, when your FD gets matured, you’ll get the whole 10,000 rupees back along with interest. You can also decide whether to get the interest money alongside the maturity of the FD or in instalments. This is how easier it is. You can very easily get a fixed deposit.

Generally, you can get an FD for a minimum of 7-14 days and up to ten years maximum. Moreover, it doesn’t matter what changes happened due to any market fluctuations; you’ll get the same amount of interest upon which you created the FD, be it 14 days before or ten years.

Eligibility of Getting a Loan against FD

Getting a loan against FD might seem easier, but a few criteria must be followed. Below are the criteria you must check before applying for a loan against a fixed deposit.

  • You must have a fixed deposit account
  • You can not get a loan against fix deposit in the name of a minor
  • Fixed deposit accounts need to be more significant than the loan amount
  • The payback term of a loan and be higher than the tenure of a fixed deposit
  • You can not apply for a loan against a fixed deposit if you have a five-year tax-saving FD.

Procedure to Get a Loan against FD

You can use the FD to get loans. Hence, it is not necessary to prematurely break the FDs. Bank holders can get the loan by logging in to their online banking accounts.

However, you can obtain it through offline mode if your bank service doesn’t provide the facility of online banking. You must submit an application form, a few required documents and the FD receipt to begin the process. 

Benefits of Loan against FD

Following are the benefits you can avail of while getting a loan against a fixed deposit.

  • You need not pay any processing fee during the loan processing.
  • You can get a loan against both domestic as well as NRI FDs.
  • You get a lower interest rate against an FD.
  • You do not need to break the premature FD while you proceed to avail of the loan to save the penalty on a premature withdrawal.
  • You get a seamless and easy process of availing of the loan.

Features of Loan against FD

Following mentioned are the features of getting a loan against FD:

  • Lesser Documentation

Since the bank already has the documents you submitted while opening the FD, you need not submit those again. Hence the paperwork becomes easier as the documents such as ITRs, income proofs and tax returns are there with the bank already.

  • Loan Amount

In the case of a normal loan, the loan amount provided depends on several factors such as duration, repayment schedule, income, credit score and many others. In a loan against FD, the maximum amount depends upon the amount of money in your FD.

Hence, the larger the amount of money in your FD, the larger the loan you will get.

  • Low Rate of Interest

The interest rate on the FDs is lower than the normal loan as they are used as collateral for a loan. The interest rate on a loan against a fixed deposit varies from 2%-2.5%, which is lower than the interest rate on a personal loan.

Therefore, the EMIs of these loans are lower.

  • Prepayment

On the one hand, if you have a normal loan and pay it off earlier than the tenure, then the bank will charge a penalty as the bank service loses its money that was to be paid in the form of interest.

On the other hand, when you proceed to get a loan against FD, there is no penalty as there is no loss to the bank in terms of money.

  • Credit Score

The banks generally verify your credit score before loaning you. But when you proceed to get a loan against a fixed deposit,  the bank does not ask for any credit score verification.

Hence, getting a loan against FD is easier for many people as they do not have any facilities like personal loans, credit cards etc. 


So now, if you plan to get a loan for your new home, consider getting a loan against FD. You can get a loan against a fixed deposit if you already have an FD account.

Moreover, you get a lot more benefits and features with it. It’s never too late, don’t wait anymore. Get a loan against FD and avail of exciting offers from your bank service.