18 Banks offering Personal Loan against FD
Many a times, even a perfect investor with best investment products under his/her kitty can face short term money crunch.
And during such difficult phase, these individuals have following four traditional options to arrange money:
- Prematurely withdraw money from the investments – E.g. if the person has invested money in shares, then he/she can sell the stocks and raise money. However, at the time of selling the stock, there is no guarantee that the stock will give positive return. And assuming the money needed is on a urgent basis, he/she may have to sell the stock at a price lower than the invested amount.
- Ask friends/relatives – This also is a highly recommended option to raise money at the time of emergency. And if it works, then nothing better, as the person lending you money won’t charge any interest. However it is highly recommended, that borrower should repay money along with some interest. This way, friend or relative won’t be at loss since they could’ve invested that money elsewhere and earned interest. But if option doesn’t work, then individual will have to look for other means.
- Ask employer – There are many employers who offer loan to their employees. However availing loan from the company you work for, depends on various factors such as – loan amount required, employees tenure and so on. Again
- Apply for personal loan with bank – This is the most common solution to meet the financial crunch. However it is expensive, as banks charge a very high rate of interest.
But there is another option, which many people are not aware which is – personal loan against fixed deposit.
List of Banks offering personal loan against FD
| Financial Institution | Max. Loan Amount Offered i.e. % of FD Amount | Interest Rate |
|---|---|---|
| Citibank India | Up to 90% | 2% above FD rate |
| United Bank of India | Up to 90% | 1% above FD rate |
| State Bank of India | Up to 90% | 1% above FD rate |
| HDFC Bank | Up to 90% | 2% above FD rate |
| Bajaj Finserv | Up to 90% | 2% above FD rate |
| Bajaj Finserv | Up to 60% | 2% above FD rate |
| Axis Bank | Up to 85% | 2% above FD rate |
| Federal Bank | Up to 90% | 2% above FD rate |
| ICICI Bank | Up to 90% | 2% above FD rate |
| Deutsche Bank | Up to 90% | 2% above FD rate |
| Karur Vysya Bank | Up to 90% | 2% above FD rate |
| Mahindra Finance | 60% to 75% | 2% above FD rate |
| Dena Bank | up to 85% to 90% | 2% above FD rate |
| Central Bank of India | Up to 90% | 2% above FD rate |
| IIFL Holdings Limited | Up to 90% | 2%-3% above FD rate |
| Diwan Housing Finance Limited | Up to 75% | 2% above FD rate |
| Abhyudaya Bank | Up to 90% | 1% above FD rate |
| Canara Bank | Up to 90% | 2% above FD rate |
Note: There are many other banks offering such type of loan. So it is recommended to contact your bank where you hold FD account.
Benefits of Overdraft Loan
Fastest Loan: Loan against term deposit is considered to be the fastest loan. Meaning, the loan amount is disbursed within 24 hours of successful application procedure. This is because the documentation is minimal as the bank already has sufficient details of the applicant.
Low interest rate: Since loan against FD is a secured loan, the interest rate charged is low compared to traditional loan. Typically banks offer 7% interest annually on the FD account. So when loan is taken against fixed deposit, the rate of interest is 2% to 3% higher than the FD interest. So rate of interest becomes 9%, which is very low compared to traditionally taken personal loan where the interest charged is minimum 16%.
Cost effective:
- The interest is charged only when the loan amount is utilized.
- Interest is charged only on the amount utilized and not on the entire loan amount.
- No prepayment penalty.
- There is no processing charge.
- Investor continues to earn interest on the FD account.
- Investor continues to remain the owner of your fixed deposit account.
Features:
- Tenure of loan is not greater than the FD tenure.
- Loan amount granted varies for each bank.
- Investor can renew the FD account and at the same time renew the loan tenure.
- Your FD is marked as lien and attached to the loan. Meaning, if you are not able to repay the loan amount, then banks have right to use FD amount to recover their money.
Author Bio:
Hi, I am Nikesh Mehta owner and writer of this site.
I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business.
I can be reached at nikeshmehta@allonmoney.com. You may also visit my LinkedIn profile.
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