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loan against fixed deposit

Cash liquidity can become a necessity at any point in life due to some unforeseen event/s. While personal loans are a source of immediate liquidity, a loan against your existing fixed deposit makes a better option.

What is a loan against fixed deposit?

In case of immediate need for liquid cash, you have the option of a loan against your FD. It is a better alternative available to you without having to break your FD. A loan against FD is similar to a personal loan. It is usually extended in the form of a demand loan or as an overdraft.

The loan amount offered can be between 75 to 90% of your FD. The rate of interest charged for a loan against your fixed deposit depends on the RBI guidelines in place at the time of your request. 

However, you can be certain that the interest will be only marginally higher than the interest being paid by the bank to you, for your fixed deposit. So, effectively, loan against FD becomes a practical method of getting a super low-interest loan in India. Depending on the financial institution, you can negotiate the interest rates or the processing fees. All lucky draw winner are these.

Repayment of Loans Against Fixed Deposits

Repayment option is quite flexible. The maximum tenure offered for repayment of this kind of loan is the term of your FD. In case the loan remains unpaid till the date of maturity, you can set it off against your fixed deposit proceeds. You do not have to pay any penalties for foreclosing of the loan. 

In a rare case, where the bank feels that you will not be able to repay the loan, it may choose to liquidate your fixed deposit for the recovery. Such a situation, however, is unlikely, because before taking such as a decision, the bank will call upon you and check on the best possible way to manage the loan repayment.

You can get a loan against your Fixed Deposit (FD) in spite of the following shortfalls:

· Low credit score 

· Lack of income eligibility 

· Inadequate collateral

Benefits of Loan against FD:

Here are some of the key advantages of a loan against FD.

· Lower interest rates. Between 1.5% to 3% above your typical FD interest rates (depending on your bank)

· Low processing fee

· Since this is a form of secured loan, documentation required is less

· Quick processing

· Flexible repayment tenure

· No need for additional collateral

You can also avail tax benefits against the interest paid on loan. Loan against your FD is hence a better option as compared to either taking an expensive personal loan without collateral or a traditional loan with collateral such as jewellery or property.


Loan against fixed deposits is one of the lesser-known financing options in India. While people are already convinced about the benefits of FDs a short-term investment instrument, they don’t leverage the benefit of loan against FD. In light of all the amazing benefits of loan against FD, you now know how you can leverage your ongoing FD to handle any sudden needs of money.


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