Loan Against FD: Here Are The Key Factors to Consider

Loans

When one needs immediate funds, then taking a loan against a fixed deposit is a convenient option but before applying one needs to know these factors to consider.

Factors to consider

1. Loan limit-

The loan amount one can obtain against a fixed deposit is influenced by more than just a fixed percentage; it also considers factors such as the bank's policies, the duration of the FD, and the borrower's profile.

2. Interest Rate

The rate of interest of loans against FDs is usually higher than FD rates by one to two percentage points. For instance, if FD earns six per cent interest, the loan will have an additional one or two per cent.

3. Repayment

The loan term typically matches the maturity period of the fixed deposit, requiring repayment by or before the deposit matures.

4. Loan Disbursement

For immediate financial needs, one should go for these types of loans as they require minimal documentation. Unlike other loans, these require no restrictions on fund usage.

5. Eligibility

Indian residents, Hindu Undivided Families (HUFs), and businesses such as sole proprietorships and partnerships are eligible to apply. Fixed deposits under five-year tax-saving schemes, minors, and many non-resident Indians (NRIs) are excluded.

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