Fixed deposit is one of the most popular financial instruments availed by millions of people across the country. Many individuals opt for fixed deposits for various benefits including guaranteed returns, ease of investment and flexibility among others. If in urgent need of cash, you can opt for loan against fixed deposits. Several top banks in the country - public and private sector banks- provide loans against fixed deposits. Axis Bank, HDFC Bank, SBI and ICICI Bank among others offer loans against fixed deposits in the form of overdrafts. What’s more, some banks including HDFC Bank and Axis Bank offer loans against NRI fixed deposits as well.
Features of Loan against Fixed Deposit
The salient features of Loan against Fixed Deposit are as follows:
Features of Loan against Fixed Deposit
The salient features of Loan against Fixed Deposit are as follows:
- Overdraft: Loans against fixed deposits are given in the form of overdrafts. Account holders, therefore, do not have to break their fixed deposits before the completion of the tenure
- Quantum of Loan: There is no standard amount which can be sanctioned since it depends on various factors including the bank and the deposit amount among others. However, in most cases, around 70 to 90% of the amount deposited in fixed deposits can be availed as loan
- Rate of Interest: While the rate of interest offered on loans against fixed deposits may vary from bank to bank, in most cases, it is around 2 to 2.5% above the interest offered by banks on their fixed deposits
- Tenure: In most cases, the maximum tenure of a loan against a fixed deposit is the term of the deposit
- Interest advantage: Loans against fixed deposits may be cheaper than personal loans which are offered at 14 to 30% in most cases.
- Fixed deposit: It is important to note that an account holder can continue to enjoy interest on his or her fixed deposits even after loan disbursal
- Repayment: An account holder has to make repayments either in a lump sum or in EMIs according to his or her financial requirements. The onus of repayment is on the all the holders of fixed deposits in case of joint accounts
- Default: In case an account holder cannot repay the loan, a bank is well within its rights to break his or her fixed deposit
- Application: Customers have to fill in the required information in the application forms with receipts (fixed deposits).
- Availability: Loans against fixed deposits can be availed by corporate organizations and third party individuals as well .
- Foreclosure: Most banks do not levy any specific penalty for foreclosure
- Prepayment penalty, processing fees: In most cases, banks do not charge levy prepayment penalty for personal loans taken against fixed deposits. Banks, however, charge small processing fees for offering loans against fixed deposits which may be decreased or waived altogether depending on the relationship shared by a customer with a bank.