Fixed deposits (FDs) are a popular investment choice because they provide a secure method to grow your funds while earning a fixed return. However, there may be instances when you require emergency finances, and selling your FD appears to be the only alternative. But wait! There’s a better approach to acquiring the money you need without risking your FD. You can get a loan against your fixed deposit. This financial solution lets you use your FD as collateral to borrow money at a lower interest rate. In this post, we will examine how you may take out a loan against your FD, the benefits, and some of the top loan companies that provide this service.
Understanding Loan Against FD.
A loan against FD is a secured loan that uses your fixed deposit as security. You can use it to secure a loan instead of liquidating your FD early and paying penalties. Depending on the bank or financial institution, the loan amount might range up to 90% of the FD value. These loans often have an interest rate of 1-2% higher than a fixed deposit, making them a reasonable choice for quick funding.
Benefits of Taking a Loan Against a Fixed Deposit
Lower Interest Rates: Compared to personal loans or credit cards, the interest rate on a loan against FD is significantly lower. This makes it a low-cost alternative for financial emergencies.
No Credit Check: Because your FD secures the loan, banks usually do not need a credit check. This implies you can acquire the loan even with a bad credit history.
No penalty for prepayment- Prepayment refers to the ability to return a debt in full before the agreed-upon due date; however, fees may apply. If you take out a loan against FD, you will not have to incur a prepayment penalty. You can also earn interest on borrowing against your FD.
Minimal Documentation: Since NBFC or the bank you are obtaining the loan from already has your information, issuing the loan is simple. The application for a loan secured by a fixed deposit must be submitted together with your identity documents and fixed deposit receipts.
Reduced interest rate: Since an FD acts as the loan’s security, the interest rate on these loans is less. In general, personal loans have interest rates greater than FD interest rates, reducing loan EMIs.
How to File a Loan Application Against FD
Now, let’s quickly jump into the process of filling out a loan application. ‘
The process of applying for a loan against your FD is simple. Here, I have mentioned all the points that will help you fill out the form in a go.
Verify Eligibility: The first thing that you need to consider is the eligibility. Find out whether your FD qualifies for a loan. It is important to know eligibility because some banks ask for active FDs in your name.
Application: The second is to complete the form. You can get the form online, or you can go to the bank.
Send in Documents: The next thing you have to do is send all the necessary paperwork. You have to submit your FD receipt and identification verification with the application form.
Loan Agreement: After all this, you have to sign the papers that the bank has given you.
Loan Disbursement: Lastly, when the application process is done, you have to wait for approval. When your loan is approved, the money will be deposited into your account on the same day.
Top Loan Companies Offering Loan Against FD
Loans against FD are a feature of many banks and financial organizations. Here are a few of the best, which are renowned for their affordable prices and accommodating customer service:
1. HDFC
Another top loan company that provides excellent incentives for borrowing against FDs is HDFC Bank.
2. SBI
Among the biggest banks in India, SBI provides competitive loans against FDs.
3. ICICI
This bank offers competitive loan products against FD.
The Bottom Line
All in all, we can say that getting cash without risking your investment is a great idea when you take out a loan on your FD. I would say it’s a wise financial decision to make during crises. Reduced interest rates, speedy processing, and ongoing interest profits make it more powerful. The top loan companies or any reputable bank with flexible terms and affordable rates, such as SBI, HDFC, ICICI, etc, provide appealing loans against fixed-rate notes.
Note: Always go through the fine print of the loan application before picking the loan that best suits your circumstances. Do not forget to evaluate your alternatives.
If you know the procedure and the perks attached to it, you can utilize your FD to its fullest. It will also help you to make wise decisions. Moreover, this also guarantees that your financial goals are fulfilled and that too without sacrificing investment quality.
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