Do Not Take Loan On FD At Cost Of Safety Net

Queries

Geeta Sharma, email

I have saved around Rs 8 lakh in a fixed deposit (FD) for a car but I am considering to opt for a loan against the FD. This loan has a lower rate of interest than a car loan. I have little credit history and no credit card. Should I use the FD for the loan or keep it as an emergency fund and take a regular car loan, given my emergency buffer is just Rs 1 lakh?

While a loan against an FD may appear attractive due to the lower rate of interest that it offers, it may not be the most prudent option in your case.

With only Rs 1 lakh as an emergency fund, pledging your Rs 8 lakh against a car loan would limit your financial flexibility early in your career. Emergency savings should ideally cover six months of essential expenses, and locking funds could cause stress during unforeseen events, such as job loss or emergency medical needs.

Since you lack a credit history, taking a regular car loan and repaying it on time can help build your credit history. A balanced approach is to use a part of your savings as a downpayment for your car, take a moderate car loan for the rest, and keep enough liquidity to boost your emergency buffer.

Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution

Rohit Srivastava, email

I am 26 years old and have recently started working. I am planning to buy a studio apartment in an upcoming project around the Delhi-National Capital Region (Delhi-NCR) for Rs 30 lakh. What factors should I consider before finalising the project?

The average cost of a 1BHK flat in Delhi-NCR ranges from Rs 50 lakh to Rs 2 crore. Since budget is the primary driver, identifying high-potential areas within your price bracket is essential, especially as limited funds leave little room for price negotiations.

Despite these constraints, 1BHK homes work well as investments. Their lower size generates high demand from students and working professionals, making them easy to lease. However, to protect this, it is critical to choose a developer with a proven track record. While projects by premium developers may cost more, they significantly reduce the risk of project delays. Beyond the building itself, evaluate the infrastructure. Ensure the locality has existing amenities or confirmed future development plans. Finally, never overlook the safety quotient, as areas with better security consistently see higher rates of appreciation.

Sudhanshu Mishra, Principal Partner & CBO, Rentals & Property

Ritwik Gupta, email

I am 25 years old and started earning two years ago. I have saved Rs 5 lakh as an emergency corpus in my savings account. Should I open multiple recurring deposits (RDs) across different tenures with this amount? Or should I invest this money in some liquid fund?

At 25, your biggest risk is not volatility, but illiquidity. A corpus of Rs 5 lakh in a savings account earns just 2.50-4 per cent, and falls behind inflation. RDs are meant for monthly savings, not lump sum investments; you probably meant FDs. However, liquidating an FD midway reduces the rate of interest to the applicable period, and the interest is also fully taxable.

Savings accounts are safe, but offer poor yield. High-quality liquid funds, Treasury Bills, Government securities (G-secs), and AAA instruments, give better post-tax efficiency and quick liquidity, often on the same-day or on T+1 basis.

A better option in your case would be to keep around 1-2 months’ of expenses in a savings account for instant access, park the rest in a low-risk liquid fund, and review the credit quality periodically.

Col. Sanjeev Govila (retd), Certified Financial Planner, CEO, Hum Fauji Initiatives, a financial advisory firm