Loan Against FD: How to apply online, eligibility criteria & documents required

A loan against a fixed deposit is a type of loan where a person pledges their fixed deposit as collateral. In this write-up, I will tell you about how you can apply online for a loan against FD, its eligibility criteria and the documents required.

FD acts as a security for the loan. You can obtain the loan against the deposit amount as a lump sum, just like with other credit facilities.

Fixed deposits are one of the safest investments a person can choose. Taking out a loan against a fixed deposit can be a wise decision when you're short on cash, especially in an emergency. Some of the causes of this are the quick process with little documentation and the simple accessibility to finances. FD acts as a security for the loan. You can obtain the loan against the deposit amount as a lump sum, just like with other credit facilities. The loan amount may be repaid in equivalent monthly installments or EMIs. You may be able to borrow up to 90% of the value of your fixed deposit, depending on the lender.
From one lender to another, the terms and conditions may differ, including the interest rate and the duration of the loan. Banks can charge up to 3% more for loans secured by fixed deposits than the current FD interest rate. When you take out a loan against a fixed-rate deposit, the interest rate you pay is higher than the rate on your fixed-rate deposit at the time. For instance, you can anticipate 7% interest if your deposit has that rate.

Here’s how to apply online for a loan against FD

Log in to the issuer’s website.
Click on the Fixed Deposit section.
Select the option- ‘Overdraft facility against FD’.
Enter the relevant details such as the required loan amount, tenure, and more.
You will receive notifications regarding your application for your loan through email or SMS.

Here are the eligibility criteria for a loan against FD

The applicant must have a fixed deposit with the bank or financial institution where they are applying for the loan.
The following entities are eligible for a loan against FD-

Family trusts
Resident Indian Citizens
Hindu Undivided Family
Clubs, Associations, and Societies
Individuals and joint fixed deposit account holders
Sole proprietorships, partnership firms, and group companies

Remember the following-

TRENDING NOW

The fixed deposit (FD) should not be in the name of a minor.
The loan can’t be opted for by a 5-year tax-saving FD account holder.

Here are the documents required to apply online for the loan against FD

A signed application for the loan against a fixed deposit
The FD receipt was discharged in favor of the lender
Standing instructions to the bank, if any

However, while availing of the loan, the lender must be fully aware of the terms and conditions, such as interest rates, repayment tenor, processing charges, and more.

TAGS: