FD

Fixed Deposits are the most preferred mode of investments because they provide secure and reliable returns. The interest and the fixed deposit returns do not vary according to the fluctuation in the markets, which has made it very popular. Another aspect that has made the FDs popular is the option to take a loan against it. In case of emergency, instead of terminating your FD prematurely, which induces a penalty, you can instead opt to avail of a loan against it.

Moreover, the loan rate is better on FD as compared to a personal loan generally. This better loan rate comes as an added advantage to the fact that you continue earning interests on your FD even after taking a loan against it. PNB housing finance FD provides the best FD interest rates to their customers. Usually, the interest rate for a personal loan ranges from about 14% to 30% per annum.

Eligibility criteria to avail a loan against FD

All the FD holders, including joint accounts and individual holders, can apply for a loan against FD.

However, an FD in the name of a minor is not eligible for the loan against the fixed deposit.

Investors with 5-year tax-saving FD are not eligible to apply for this loan.

PNB Housing finance FD provides a loan against fixed deposits with an interest of 1% and the already determined FD rate. This interest rate on loan is one of the best FD rates offered by banks and corporates.

What is the advantage of Loan against FD?

Loan against a fixed deposit is available at lower FD interest rates than a personal loan.

Most of the banks and corporates do not charge any processing fee to apply for this particular loan. Also, there are no hidden expenses when you are availing this type of loan.

It is much easier to obtain a loan against a fixed deposit than a personal loan because you already have something as a guarantee and the lenders feel more secure. Additionally, in case of a Loan against FD, minimum documentation is required.

To take the loan, you don't need to break the fixed deposit. Instead, you can continue to earn interest while you refinance using a loan on the FD. As the FD itself acts as a security or collateral, no CIBIL check is required. This also helps you to avail the loan in the quickest manner possible.

What are the disadvantages of Loan against Fixed Deposits?

In case the customer fails to service the loan, the bank can foreclose the borrower's fixed deposit to recover the money lent.

The loan tenure can only be as long as the remaining tenure of the fixed deposit maturity.

Conclusion

Loan against a fixed deposit is an excellent alternative against a personal loan because of its lower interest and rate and is easy to apply. It is a good option in an emergency as it does not require you to break your FD, which causes a penalty.