During any emergency or urgent situation, you need to search for different schemes for loans. One of the processes you can go with is getting loan against your FD account. It will also save you time if you take short term loans. You can easily apply for loans without breaking your premature FD account.
This gives an answer to our topic; Yes, we can take loan against Fixed Deposits
Why should a person go for loan against Fixed Deposit FD rather than other loans?
There are a few reasons why a person should go with the process of taking a loan against a fixed deposit:
1. Personal loan and other loans consist of a higher interest rate than loans against FD (Low in interest rate).
2. You don’t have to break your FD or select premature withdrawal. It can cost a loss of interest in your FD.
3. No extra fee charge for processing.
4. Can get diverted to both domestic and NRI Fixed deposit.
5. You can pay your money in small installment or lump sum.
6. You won’t get charged for any extra bucks when seeking the preclusion of the credit from your fixed deposit.
7. No such extra or a separate tenancy.
8. Loans get provided in minimum documentation.
9. You will still get an interest in your FD.
Loan Against Fixed Deposits
Here, a person looks out for a loan with a low-interest rate and without breaking his FD’s or other accounts. A secured loan process is suggested where you can profess your fixed deposit and take the loan. You can take a loan up to 90-95% of your deposit amount in FD.
Situations Under Which You Can Not Apply For A Loan Against Fixed Deposits (FD)?
There are conditions where can not apply for a loan against Fixed Deposit. They are:
i. Minors (Less than 21) who have their FD accounts but still cannot apply for the loan.
ii. Investors who are already paying five years of tax saving fixed deposit.
Different Banks Providing Loan Against Fixed Deposit
- Single or joint account holders should be of SBI.
- You can use the overdraft facility through net banking if you are a single account holder.
- If you are a joint account holder, all the account parties need to request the loan process.
- If all the joint members do not sign the application, the Bank will cancel the loan application.
Minimum and maximum loan amount?
SBI provides a maximum limit for an online overdraft of RS.25,000. Added to that, a cash limit for overdraft as Rs. 5 crores. The amount requested for the loan should be less than 90% of your total investment in FD.
Unlike other banks, SBI does not charge any extra or processing fee for providing the loan.
SBI provides – The investment amount of min. Rs 1,000 in tenure of 7 days of a minimum interest of 2.90%.The investment amount of max. No Limit – Tenure of 10 years Interest rate of max. 5.40%.
The advantages of SBI loan against FD
- You can get a loan up to 90% of your deposited money.
- You’ll have to pay low interest.
- No stable interest.
- No extra fee for processing.
- If the payment gets completed back in advance, no penalty gets charged.
2. ICICI – Loan Against Fixed Deposit
- You must have created an FD account in the ICICI bank.
- NRIs are also allowed to request for loans against the Fixed Deposit.
Loans are available at the interest rate of 2-3% over the amount deposited.
Advantages furnished by the ICICI loans against FD:
- In the case of NRIs, the loan can get applied by a third party or account holder.
- Loans get provided until 90% of the deposit value.
- Friendly process.
- Easy and fast application.
3. HDFC – Loan Against Fixed Deposit
- Fixed deposit holders of NRE and FCNR.
- NRO deposit owners.
The interest rate of HDFC bank is subject to change. HDFC has attractive rates of interest.
Benefits of loans against FD in HDFC
- The interest rates are quite striking enough not to let go.
- HDFC provides 90% of the deposited value.
- You get permitted for your premature withdrawals on FDs.
- You can continue with the loan process online without any need to visit the Bank.
4. Loans Against Fixed Deposit – Axis Bank
- You must be a citizen of India.
- You must have an account in Axis Bank.
- Competitive interest rate.
- You have an interest rate of 2% on loans above one crore.
- For loans above one crore, you’ll need to pay an interest rate of 3%.
- If any third party customers avail of the loan, you’ll have a 4% interest rate.
Advantages furnished by the AXIS BANK
- You’ll get up to an 85% loan on your FD value.
- The Bank requires no EMI or post-dated checks.
- You can easily extract the requisite amount in terms of need before the tenure ends.
- You can continue with the loan process online without any need to visit the Bank.
- No charge or penalty for early closure of the account.
5. CITI Bank Features Of Loan Against Fixed Deposit
- You should be at a major of 21 years old.
- Public limited companies are eligible for loans.
- Stockbrokers can apply for a loan.
- Limited companies.
- You should be a certified Indian citizen.
You can take up to 90% of the deposited amount in your Fixed deposit. For example, if you have an FD of 1,000 INR, you will be eligible for 900 Rs.
Advantages furnished by the Citi bank for getting loan approval against FD
- You can take the loan if you have deposit members of the same household.
- Interest rates are taken only from the loan amount.
- No interest from the FD amount.
- A simple application form.
Loan Against Fixed Deposit
Taking loan against fixed deposit is one of the lowest-cost loan options. Essential things one must know about taking loan against fixed deposits :
i. A loan would get marked on your fixed deposit to prevent its withdrawal till the loan is repaid.
ii. Generally, banks provide loan against fixed deposit only for FD’s from their Bank.
Interest Payout For The Loan Against A Fixed deposit
You can choose to get interest payments every month or quarter or when the deposit matures with time.
Requirements And Needs For Loans Against FD
i. You must be having a fixed deposit account from the Bank you are planning to avail of the loan.
ii. A certified Indian citizen.
iii. You will need family trust.
iv. Clubs, societies, and associations can avail of the loan.
v. Partnership companies, group associations, or other big businesses can take loan against fixed deposits.
Documentation Required For The Loan Against A Fixed deposit
a. Application form with the signature of the holder.
b. Pre- signed agreement.
c. A duly signed slip of FD from the Bank.
Do you need to go to banks for availing loans?
Nowadays, lenders allow and suggest you avail of a loan online in case of a fixed deposit. Only in some cases you will need to go to the nearest branch of your Bank. State Bank of India, HDFC Bank, Axis Bank, does loan process for fixed deposit online. Whereas, in Federal Bank, no online services get provided. You have to go to the Bank.
How much loan does a bank provide against a fixed deposit?
Minimum loans provided by banks are:
- State Bank of India gives 90%,
- ICICI bank gives up to 90%,
- Bank of Baroda gives up to 95%,
- Axis Bank provides up to 85%,
- HDFC Bank gives minimum rupees 25000,
- Citibank gives up to 90%,
- Yes, Bank, Punjab national bank, Canara bank gives up to 90%.
Deposit Loans In A Fixed Deposit
Deposit loans are like a personal loan. When you invest in a bank FD in a deposit loan, you will get provided with a loan without a need to break the fixed deposit.
Ways To Repay On Overdraft
You can apply for a money transfer card. While for a bigger overdraft, you can go for 0% money transfer cards. Using these cards, funds, or amounts from the credit can get moved into your current account. Apart from that, you can use the cash to pay an interest fee of your overdraft.
Best Fixed Deposit Schemes For Loans Against FD
The best Fixed deposit schemes for loans against FD are:
- Finance Small Finance Bank with 8.50%.
- KTDFC with 8.00%.
- Shriram city with 8.45%.
- Mahindra Finance with 7.80%.
- Sundram Finance with 7.00%.
- Lakshmi Vilas Bank with 6.50%.
- ICICI house finance with 7.40%.
- Yes Bank with 7.25%.
- ICICI Bank with 6.00%.
- HDFC Bank with 6.00%.
Can you trust SBI as a safe FD account?
Yes SBI, HDFC Bank, and ICICI Bank are safe for fixed deposits as per RBI. For better and strong Banks emerge, more banks will soon be added to this list by RBI.
Points for taking loans from fixed deposit in SBI
a. The amount for a fixed deposit should be at least 10,000.
b. A fixed deposit of less than 10,000 can’t get applied.
c. The interest rate against the fixed deposit is 0.75% more than the interest rate being paid for actual FD.
Best Scheme In SBI
SBI annual deposit is the best scheme in SBI. In this, a lump sum amount gets invested, and payment gets rendered through equated monthly installments. Rupees 25000 minimum investment get allowed under this scheme.
Can home loans avail from the fixed deposit?
Yes, you can get home loans from a fixed deposit. A loan against a fixed deposit is a secured loan, so the interest rate will also be less. You must be having sufficient savings to finance a home loan against a fixed deposit.
Age limits For Home Loans In Fixed Deposits
The age limit is a fixed deposit of equal to the salaried class. A salaried person with at least rupees 1,00,000 gross income per annum. For loans, the minimum age should be 23 years. The maximum age for taking loans is 65 or retirement age.
Is the loan available from LIC policy?
Yes, but a loan from LIC policy is only granted to LIC endowment policyholders. The loan amount is equal to the submission value of LIC policy. 90% of the policy value gets diverted as a loan but in paid-up policy, as it can be 85%.
Some best low-interest loans against FD:
- Light stream up to 3.49%.
- Payoff up to 5.99%.
- Best Egg up to 5.99%.
- SoFi up to 5.99%.
- Freedom Plus up to 7.99%.
- Pen Fed up to 6.49%.
- Upstart up to 8.13%.
- Lending club up to 10.68%.
- Prosper up to 7.95%.
- Upgrade up to 7.99%.
- Marcus by Goldman Sache up to 6.99%.
- TD Bank up to 6.99%.
Four Types Of Loans In Fixed Deposits
1. Long Term Loans
Large commercial lenders mostly take long term loans. These types of loans get furnished for the business of working capital. These loans are repaid by monthly processes and with a low-interest rate.
2. Short Term Loans
Short-term loans get used in short investments for a shorter-term. Short term loans provide amounts below a hundred thousand. Seasonal businesses, along with retailers, use short term loans. These loans get provided by banks and credit unions.
3. Lines Of Credit
It aims at providing, instead of getting a lump sum, starting a line of credit benefits in small businesses. Lines of credit give funds immediately when an emergency or need arises. Compounded interest and fees are high. Lines of credits are best for temporary emergencies in income.
4. Alternative Financing
Alternative financing is much smaller than bank loans and has a high-interest rate. Alternative financing is used to start a new business, shortfalls in cash, financing small scales, etc.
Disadvantages Of Taking A Loan Against Fixed Deposits
1. You will get provided with less interest rate on your fixed money.
2. If money is not paid duly on a date, then the Bank has the right to foreclose FD’s account for retaining the money.
3. If you don’t have an FD account, it’s better to go with a personal loan.
4. Residual tenure cannot get exceeded by the tenure of the loan.
Advantages Of Having Fixed Deposits Account
i. A fixed deposit is a fully secured and less risky investment.
ii. You can invest in a fixed deposit for a short or long tenure.
iii. A Fixed deposit gives fixed and stable returns months after months.
iv. Fixed deposits are highly liquid.
v. You can take a loan on your fixed deposits.
vi. Your fixed deposits get insured.
vii. You can choose when to receive the interest payout.
viii. Less paperwork.
ix. No penalty in prepayment.
Maturity In A Fixed Deposit
Maturity Amount In A Fixed Deposit
The maturity amount in fixed deposit should be of at least rupees 1000 deposit tenure. The maturity value of the deposit depends on the fixed deposit period of the money. It generally ranges from 7 days to 10 years. The maturity amount gets calculated by interest compound frequency and is based on the monthly, quarterly, half-year, or annual frequency.
Maturity Or Closure Of Fixed Deposit
Once your fixed deposit gets matured, then the money will get transferred to the depositor’s savings account. The closing process can be done online in online fixed deposits on the maturity date. The amount method will be moved to the savings bank account.
Taxes On The Maturity Of Fixed Deposit
All the interest achieved from the fixed deposit is fully taxable. Instead of deducting tax on the fixed deposit’s maturity, it gets deducted during the time they credit interest to your account. Banks deduct TDS at the end of each of your fixed deposit time.
The Maturity Date Of The Fixed Deposit
The maturity date is when the amount that got deposited has to be returned to the investor with interest. The maturity date gets decided during the making of the contract for investment as an expiry date.
Key Differences Between Fixed Deposit Account And Saving Account
1. Fixed deposit accounts are accounts less risky to grow your money by storing in it. Whereas savings accounts are bank accounts that you put your savings into.
2. Tenure of fixed deposits goes for at least 12 months for better rates. Whereas for saving accounts, there is none.
3. Interest rates provided by fixed deposits are better and valid for a longer tenure. Whereas, for saving accounts, the same interest rate is regardless of the tenure.
4. In fixed deposit amounts to be deposit should be at least 10,000. While in savings accounts smaller deposit amount is acceptable.
5. Currency of fixed deposit is Singapore dollars by default. The same goes for a savings account, i.e., Singapore dollars by default.
6. You can withdraw from both a fixed deposit and savings account.
7. Interest payments of fixed deposits are quarterly- annually. While for Savings accounts, it is monthly.
8. There is no risk in fixed deposit and insured up to 50,000 by SDIC. Whereas savings accounts are also risk-free and insured up to 50,000 by SDIC.
Frequently Asked Questions
1. The withdrawal process can be done from any branch?
No, once the fixed deposit get matured, or on the date of maturity, you can visit any bank and close your fixed deposit.
The amount will get transferred to your mentioned savings account. To avoid misuse and fraud, you will have to withdraw a fixed deposit from your home branch only.
2. The least and max tenure of FD?
The minimum period of fixed deposit is at least seven days, and the maximum period is ten years.
3. FD will double in how many years?
It takes 12 years for a fixed deposit to double the money, whereas it takes six years for mutual funds to double.
4. Can you get a fixed deposit account without having a savings account in the same Bank?
Some public sector banks instruct to open saving account for fixed deposits. But many public or private Banks simply open fixed deposits without saving account. You will need to provide KYC documents and other essential documents depending on the amount.
5. What should you do to get a minimum return on your fixed deposits?
For getting a minimum return from the fixed deposit, you must go with the optimum period. A deposit period of 12 months is the best. During this, it gets more interest in some banks.
6. Can money get added to fixed deposits?
No, you cannot add money to your fixed deposit as its term itself as “fixed.” If you want to add money, you will need to break the fixed deposit and open and new fresh FD with the total amount.
7. Are minors allowed to take an FD loan?
No, minors cannot take loans from fixed deposits. For taking loans, you should be a major that is 18 years old. Once you reach a significant age, that’s it 21; then, you can request banks for providing loans against your fixed deposits.
8. Can the fixed deposit be opened for small-time like three months?
Yes, if you want to invest for a short period like three months, you can open a fixed deposit. For a small-time fixed deposit, a decent interest return is given. AU bank gives 6.90 percent for regular persons and 7.40 percent for the senior citizen if you invest for three months.
Banks and finance companies have high-interest savings accounts that give about 2% or 3% p.a. on your savings. Interest rates get provided by fixed deposit change every month so, it can be profitable. Loans against fixed deposits are easy and less risky. Loans get provided without breaking your FD’s. Taking loans against Fixed Deposits are good for both short term and long term run. By taking loans from your own fixed money, you don’t have to go for some other loan processes. You will get an interest rate along with it on your fixed money.