A loan against fixed deposits (FDs) is a secured loan where your FD acts as collateral. It is a popular way to access funds without breaking your deposit prematurely.
Vizzve Finance explains the benefits and drawbacks of this borrowing option to help you decide if it’s right for you.
What Is a Loan Against Fixed Deposits?
When you pledge your fixed deposit as security, banks or financial institutions lend you money up to a certain percentage of your FD’s value, usually between 75% to 90%. The loan tenure is generally flexible, and interest rates are often lower than unsecured loans.
Benefits of Loan Against Fixed Deposits
Lower Interest Rates: Since the loan is secured by your FD, interest rates are comparatively lower.
Quick Approval: Minimal documentation and faster processing.
No Prepayment Penalty: Many lenders allow you to repay the loan early without extra charges.
You Continue to Earn Interest: Your FD continues to earn interest even while the loan is active.
No Need to Break FD: Helps you avoid penalties and loss of interest from breaking your FD.
Drawbacks of Loan Against Fixed Deposits
Limited Loan Amount: Typically up to 90% of the FD value, which may not cover larger needs.
Risk of FD Forfeiture: If you default, the lender can liquidate your FD to recover dues.
Interest Accrual: Interest on the loan adds to your repayment burden.
Not Suitable for Long-Term Needs: Best for short to medium-term financial requirements.
How to Apply for a Loan Against Fixed Deposits
Check eligibility with your bank or lender.
Submit your FD receipt and application form.
Provide identity and address proof as required.
Get approval and receive funds, often within a few days.
Tips for Using Loan Against Fixed Deposits Wisely
Borrow only what you need.
Have a clear repayment plan.
Avoid using it for non-essential expenses.
Monitor your loan account regularly.
How Vizzve Finance Supports Your Loan Needs
Vizzve Finance offers competitive loans against fixed deposits with transparent terms and customer-centric service to help you manage your finances efficiently.
FAQs
Q1. Can I take a loan against a fixed deposit from any bank?
Most banks and NBFCs offer this facility, but terms may vary.
Q2. Is the interest rate on FD loans fixed or floating?
Usually fixed, but it depends on the lender’s policy.
Q3. What happens if I fail to repay the loan?
The lender can encash your FD to recover the outstanding amount.
Q4. Does Vizzve Finance provide loan against FD services?
Yes, we facilitate loans with easy processing and competitive rates.
Published on : 10th August
Published by : SMITA
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