An Ultimate Guide to Getting a Loan Against an FD

Fixed deposits are the safest investment classes that allow you to invest your money with guaranteed, risk-free returns. As an added bonus, fixed deposits also allow you to use the invested money to take out a loan against the fixed deposit. People who have invested their savings in a fixed deposit no longer need to liquidate their investments when needed. The amount invested in the fixed deposit may continue to earn interest while you use it to withdraw additional funds in the form of a loan. Introducing you a complete guide to get a loan against FD.

Loan vs. FD – An Overview

Suppose there is a situation where you need funds urgently and you also hold a fixed deposit. In this case, instead of liquidating your fixed deposit and paying the early withdrawal penalty, you have a more lucrative option. You can continue to enjoy the benefits of your FD while taking out a loan against it. Interest will be charged on the amount of the loan taken out and not on the total amount of your fixed deposit. The maximum loan amount is 70% to 90% of the value of your fixed deposit. However, the exact amount varies among lenders.

Eligibility criteria to obtain a loan against a FD

Here is a list of eligibility criteria that you should keep in mind before applying for a loan against FD.

  1. Taking a loan against FD requires holding a fixed deposit account with the bank or financial institution from which you are applying for a loan.
  2. Your fixed deposit amount must exceed the loan amount you are requesting.
  3. If you enrolled in the FD Five Year Tax Savings, you would not qualify for a loan against your deposit.
  4. A fixed deposit in the name of a minor would not be eligible for a loan.
  5. The repayment term of the loan cannot exceed the term of the fixed deposit.

Characteristics of the loan against FD

A loan against FD includes the following features

1. Low interest rate

A loan on an existing fixed deposit entitles you to more attractive interest rates. Since the lender already has the fixed deposit amount as collateral, it becomes less risky for lenders to issue a loan. As a result, lenders can offer a lower interest rate for a loan against FD. The loan against FD interest rate is typically only 2-3% higher than the existing fixed deposit interest rate. As a result, you end up paying a lower EMI and your overall loan cost goes down.

2.No need for a credit check

The most important factor when applying for a regular loan is your credit score. Lenders are usually hesitant when granting loans to people with low credit ratings. However, when you take out a loan against FD, your credit score is not checked. People with slightly lower credit scores can avail a loan against their FDs to improve liquidity and improve their finances.

3.No prepayment penalty

Many borrowers take out a loan and prepay their arrears as soon as they have access to the funds. A penalty usually comes with the prepayment or garnishment of the outstanding loan amount. However, no such penalty is imposed when taking out a loan against FD. You are free to repay the loan amount whenever you want without having to pay any prepayment penalty.

4. Continuing interest of FD

An important advantage of taking a loan against FD is that while you pay interest on the loan amount, you also receive interest on your fixed deposit. This makes a loan against FD a much better option than liquidating your fixed deposit amount.

5.Minimum documentation

Since you already have a fixed deposit account with the respective bank or NBFC, you do not need much additional documentation when applying for a loan against FD. You may be required to show identification as well as fixed deposit receipts.

6. Flexible Loan Repayment Duration

The repayment term of a loan against FD can be less than or equal to the term of your fixed deposit. However, note that the loan repayment term cannot exceed the fixed deposit term.

7. Wider availability

A loan against FD is more widely available and can be used by both nationals and NRIs.

How to apply for loan against FD?

The loan application process against FD is smooth and hassle-free. The loan can be applied online or offline. You can simply log into your online bank account to apply for a loan or go to the nearest branch. You will need to submit a completed application form, FD receipt and required documents to begin the loan application process.

What is an overdraft facility?

Banks and other financial institutions may offer you the option of withdrawing more money from your bank account than your current balance. The lending institution charges a specific interest on the additional funds paid to you. However, interest is charged on the additional funds, not on the total limit.


A loan against FD is an easy way to meet your immediate cash needs rather than liquidating your term deposits or selling your assets. It offers a convenient way to access additional funds when needed while enjoying the benefits of your current fixed deposit. Since the loan against FD has a guarantee, the conditions of this loan are much more attractive than those of a personal loan.

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