Benefits of Taking a Loan Against Fixed Deposits

Introduction

When it comes to loans, there can be so many confusing options, each with its own pros and cons. The most convenient option could be taking a loan against a fixed deposit.

Taking a loan against a fixed deposit is more cost-effective than having to prematurely close a fixed deposit due to a lack of funds. It is better than other loan types as well in terms of eligibility criteria, interest rates, and processing time.

Learn about the benefits of a loan against a fixed deposit in this article.

What is a Loan against a Fixed Deposit?

A loan against a fixed deposit is the best option for urgent and unforeseen funds requirements. It is a secured loan. Customers can offer their fixed deposits as security and get a loan. The quantum of loans can vary from 75% to 90% of the fixed deposit amount, depending on the credit policy of the respective bank.

There are no eligibility norms specified for this loan. and all that is required is an unencumbered fixed deposit.

Features and Benefits of Loans Against Fixed Deposits

The following are the features and benefits of a loan against a fixed deposit:

• A loan amount of up to 90% of the fixed deposit will be made available to the borrower. This amount will not depend on the income and debt-to-income ratio as in the case of other loan types.
• The rate of interest depends on the fixed deposit interest rate. Normally, it is 2% above the fixed deposit interest rate and varies between banks.
• The fixed deposit certificate should be submitted to the bank before the disbursal of the loan.
• No KYC or income documents will be required to process the loan.
• The loan processing is done free of charge.
• Credit scores are not applicable here.
• The sanctioned loan amount will be credited to the borrower's bank account within no time and without any lengthy processing.
• The loan amount can be paid in a lump sum or instalments. The loan repayment can also coincide with the maturity date of the fixed deposit. Borrowers can opt to channel the maturity proceeds towards paying off the loan.
• There are no penalty charges for loan prepayments.

Conclusion

A loan against a fixed deposit can be a good option for those who need funds quickly and have a fixed deposit account. With lower interest rates, faster processing times, and less stringent eligibility requirements compared to other loan types, it can be a cost-effective and convenient way to meet one's financial needs.

Check out Federal Bank's loans against fixed deposits, which can be taken against up to 90% of the fixed deposit value.