6 things to know before taking a loan against fixed deposit

financialexpress.com:

There are many options to borrow money provided your credit score is good and your income remains stable to justify that you will repay the borrowed money on time with interest. Your financial history gives lenders the confidence to lend you without hesitation. At times your investment comes to your help when you feel you have no other collaterals to give.

Often people are confused where to borrow from as emergencies come unannounced and can often cripple one’s finances. However, access to funds in an emergency has become much easier today, with many retail credit products easily available.

Let’s take a look at one such product – loan against fixed deposits (FD).

A loan against fixed deposits, also known as Loan against FD, is a type of secured loan where an FD holder can avail of a loan against their fixed deposits. This type of loan is easily available at most banks or financial institutions which offer FDs and has become a rather popular form of availing credit in today’s times. ‘MoneyMood’, an annual report published by BankBazaar on credit trends, reflects this trend and notes that Loans against FDs have grown by 16.47% year-on-year, rising from Rs 97.5 crore in 2022 to Rs 113.9 crore in 2023.

Also Read: Loan cleared but status unpaid? Here’s what you need to do now

Let’s go through some basic features of a loan against FDs to help you understand the product better and gauge whether it is suited for your needs.

Interest rates strongly influence your ability to borrow. In the case of loans against FDs, lenders usually charge an interest rate that is 0.75% to 2% higher than the prevailing FD interest rate. This is because the FD serves as collateral, which lowers the lender’s risk, allowing them to offer a lower