The habit of saving money is something that always works for everyone be it a child or an adult. The money is invested when it is available in lump-sum, and you can utilize it when in need.
For the purpose of investment, a fixed deposit is one of the most popular financial instruments known to us. The ease of investment, promising returns, flexible tenor, and many more worthwhile features make it a valuable investment scheme.
But, think of the time when you are in need of money on an urgent basis. You look around for someone to help. Why look for someone else when you can deal with it on your own? Take a loan – a loan against the invested money in your FD.
Taking a loan against an FD is one of the advantages that you can avail. Know how it is beneficial to you!
FD loan features and benefits
Loan amount- A borrower can get loan amount up to 90% of the fixed deposit amount. Higher the amount invested in an FD, higher you can get the loan amount approved.
Interest rate- The interest rate is generally 1-2% more than the interest rate of an FD. The interest rate is comparatively lower under this loan facility than to any other loan obtained by other means.
Ease of processing- Getting a loan against your FD is a hassle-free task as you need not attach every document right from the beginning. The applicant needs not to fill the detailed forms and go through strict procedures for a loan sanction.
Repayment- A borrower enjoys the flexibility in terms of date and time for the repayment of the loan. The only thing to remember is the loan amount should be repaid in a limit to the maturity date, which cannot exceed the tenor of the FD.
Foreclosure and prepayment- Majority of the banks and NBFCs do not charge the foreclosure on loans taken against an FD. Also, no prepayment fee is charged in case of early payment of a loan.
Low processing fee– This loan can be availed at a negligible processing fee which can also be waived depending on your relationship with the lender institute. The loan applicant need not pay high processing fee which is usually charged when you take a loan by any other means.
Required documents for availing a loan against FD
- The applicant needs to submit a complete application form offered to him by the lender institute.
- Fixed Deposit details including the receipt (FDR) handed over in favor of the institute.
- A cancelled cheque in case of non-cumulative FD.
- A passport size photograph and a copy of valid identity proof.
The Bottom Line
Loan against FD is a great option if you are looking for a short-term loan at a better interest rate. Avail this loan facility at a lower interest rate as compared to any other loan, without compromising on the interest that you will earn from your FD.