5 Must Know Things For A Loan Against FD

  Author: Naveen Kumar

You are in urgent need of large amount cash and want to avoid using credit card since you may not be able to repay within the payment cycle. You also do not want to pay high interest for the outstanding balance. You also want to avoid costly loans such as personal loans. In such circumstances, taking a loan against a fixed deposit (FD) is one of the lowest cost loan options. Here are five things you must know about loan against FDs.

·      You can take a term loan or an overdraft of up to 90% of the principal amount

·      Tenure of the loan would not be more than term of the FD. However,  the maximum tenure of a loan against FD is typically of three years.

·      The interest rate charged for the loan against FD is typically 1-2 percentage points more than the interest rate of the FD. So, for a FD paying 8 per cent annually, the interest rate for the loan against FD would be 9-10 per cent.

·      A lien would be marked on your FD to prevent its withdrawal till the loan is repaid.

·      Generally, banks provide loan against FD only for FDs from their own bank.

A loan against FD is a low cost loan option to get a cash loan to tide over a financial emergency. Keeping the main features of such a loan in mind will help you decide whether a loan against FD is the right choice for you.

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