In an emergency, most people think of personal loans or credit cards.
But did you know you can unlock low-interest loans by using your own assets as collateral?
Yes — your Fixed Deposits, Mutual Funds, and even Life Insurance policies can act like a secret emergency fund.
Let’s break down how each of these works.
1. Loan Against Fixed Deposit (FD)
This is the safest and most common secured loan option.
Features:
Interest rate = 1%–2% above FD rate
Loan amount = up to 90% of FD value
No foreclosure or prepayment charges
Quick disbursal within hours
Limitations:
FD is lien-marked till the loan is cleared
If you default, bank can close the FD to recover
Best For:
People with FDs needing urgent liquidity, without breaking the deposit.
2. Loan Against Mutual Funds
Yes, even market-linked investments can get you cash!
Features:
Loan via lien on mutual fund units
Up to 50%–70% of fund value (debt > equity)
Available digitally through banks/AMCs/NBFCs
Lower interest than personal loans (around 10%–14% p.a.)
Limitations:
Not all funds accepted (only selected AMCs & schemes)
Fund NAV fluctuations can affect your loan value
Margin calls may apply
Best For:
Investors who need temporary funds but want to stay invested.
3. Loan Against Life Insurance
Your traditional LIC or other policies can help in tough times.
Features:
Available only after 3 years of policy commencement
Up to 85%–90% of surrender value
Interest rates around 9%–12% p.a.
Loan is not taxable
Limitations:
Applicable to endowment or money-back policies, not term plans
Unpaid loan = reduced final maturity benefit
Best For:
Policyholders with long-standing LICs or traditional plans.
Comparison Table
| Asset Type | Max Loan % | Interest Rate (p.a.) | Speed | Risk |
|---|---|---|---|---|
| FD | Up to 90% | 6%–9% | Few hours | FD lien-marked |
| Mutual Funds | 50%–70% | 10%–14% | 1–2 days | NAV drop can reduce eligibility |
| Life Insurance | 85%–90% (of surrender value) | 9%–12% | Few days | Lower maturity if not repaid |
Why Choose These Over Personal Loans?
| 🟢 Lower interest | 🟢 No credit score check | 🟢 Quick disbursal | 🟢 No income proof required |
Instead of borrowing from a high-interest lender, you're using your own investments as leverage — and still keeping your savings intact.
Final Word: Turn Assets into Emergency Shields
Your financial portfolio isn’t just for the future — it can help today.
FDs, mutual funds, and life insurance aren’t just investments — they’re also financial safety nets.
Use them smartly, and you’ll never fall into a debt trap during emergencies.
FAQs
Q1: Will taking a loan against FD affect the interest earned?
No. Your FD continues to earn interest as usual while the lien is active.
Q2: Can I take a loan against SIPs?
Only if the SIP has accumulated enough units and belongs to eligible mutual fund schemes.
Q3: Do I need to repay a loan against a life insurance policy before maturity?
It’s ideal to repay. If not, the insurer will deduct it (with interest) from your final payout.
Published on : 2nd August
Published by : SMITA
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