Personal Loan

Everything you should know about loan against FD in India


A loan is an extended line of credit. There are many ways to secure a loan. Some loans are unsecured. They do not require an asset or collateral. Others are secured loans. Under these categories are different types of loans. Many people think that taking a secured loan means keeping your house or car as collateral. However, there is something called a fixed deposit. Many times, people take a loan against a fixed deposit.

What Does A Loan Against Fixed Deposit Mean?

Loan against fixed deposit is a very convenient way to get money without having to sell any assets or pledge any property. The loan amount is determined by the fixed deposit amount. It’s a special kind of loan offered by banks to those who already have a fixed deposit account with them.

A fixed deposit is a savings deposit where the account holder can place money for a specific period of time. Banks offer FDs to individuals and companies for a certain term, usually ranging from three months to five years. The interest rate on fixed deposits is higher than that of normal savings accounts and helps banks earn more money.

When banks offer loans, their rates are typically two percentage points higher than the FD rate. If a depositor had purchased an FD at 7%, the interest rate on a loan secured by that FD would have been 9%.

When a customer requests a loan against fixed deposit, banks keep their FD as the collateral. Since the FD is held as collateral, it makes for a secured loan. The interest rate for a secured loan is reduced because it is a secured loan. If the borrower is unable to repay the loan, the bank can simply procure it from the FD amount. This sum is typically settled at the time of maturity of the loan.

Features/Benefits of Loan Against Fixed Deposit

  1. Lower Interest Rates: As your fixed deposit is security for a loan that is why the interest rates for these loans are lower. The rates of interest on these loans typically are lower than those for personal loans, ranging from 2 to 2.5 percent. Thus, the equated monthly instalments (EMIs) for these loans are lower as well.
  2. Minimal Documentation: The documentation needed to obtain a loan against your FD will be low because banks already have your information from when you opened your FD. You won’t be asked to provide any paperwork, such as your income tax returns (ITR) or any proof of income.
  3. No Credit Score Check: When you request a loan, lenders will review your credit score before granting you the loan. However, when determining your eligibility for a loan against FD, neither your credit score nor CIBIL will be taken into account. Therefore, these loans may be an excellent choice for those with poor or no credit scores.
  4. Loan Amount Depends On FD Amount: The maximum loan amount that you may be eligible for if you need to take out a personal loan depends on a number of factors, including your credit score, income, tenure, and FD amount. The maximum loan amount for a loan against a fixed deposit, however, would depend on the amount of money you have put into the FD account. This implies that you will be qualified for a greater loan amount if you have invested more money in your FD.
  5. No Penalty On Prepayment Of Loan: When you pay off a loan early, the bank loses out on the interest and therefore they penalize you for the same. However, no penalty is assessed in the case of a loan secured by an FD because the banks do not lose out on the interest amount. Instead, they benefit from it because they are not required to pay you any interest on the loan amount.

Who is Eligible to Apply for a Loan Against FD?

To get a loan against a fixed deposit, the basic requirement is to hold a fixed deposit with the bank/financial institution you’re seeking a loan from. However, you must also be one of the following:

  1. An Indian Resident
  2. Hindu undivided family
  3. Family trusts
  4. Sole proprietorships, partnership firms, and group companies
  5. Clubs, societies, and associations

If you want to determine whether you can apply for a loan against fixed deposits, consider the points listed below:

  1. Holders of individual as well as joint fixed deposit accounts
  2. FD in a minor’s name is not acceptable.
  3. Owners of 5-year tax-saving FD accounts are not eligible for this sort of financing.

Frequently Asked Questions (FAQs)

  1. What would happen if I am unable to make my EMI payments on the loan taken against my FD?If you don’t pay your EMIs on time, the bank will utilize the money in your FD to make up the difference in your loan payment.
  2. Can minors obtain a loan against FD?No. You must be at least 18 years old and have a valid fixed deposit in order to be eligible for a loan against one.
  3. Can senior citizens request a loan against FD?Yes. The facility of loan against FD is available to anyone who owns an FD account(except, in the case of a minor).
  4. What charges are associated with a loan against FD?There are no fees to pay, including the processing fee, to obtain the loan against FD. Interest is charged that is often up to 2% to 3% higher than the applicable FD interest rates.


A loan against a fixed deposit account is a great way to receive financing without much hassle. In this type of loan, your fixed deposit investment acts as the collateral for the loan. Due to this reason, banks also feel safe in lending you funds because they can utilize the money in your FD in case of default in repayment. You are eligible to apply for a loan against FD even if your credit score is low or you do not meet the income eligibility criteria.

If you need help in applying for a loan against FD or any other financial assistance, feel free to contact Piramal Finance.