An ultimate guide to getting a Loan against an FD

Fixed deposits are the safest investment classes that allow you to invest your money with guaranteed, risk-free returns. As a bonus, fixed deposits also let you use the invested money to take out a loan against the fixed deposit. Individuals who have invested their savings in a fixed deposit no longer need to liquidate their investments in times of need. The amount invested in the fixed deposit can continue to accrue interest while you use it to draw additional funds in the form of a loan. Presenting to you a complete guide to getting a loan against FD.

Loan against FD - An Overview

Assume there arises a situation wherein you need urgent funds and you also hold a fixed deposit. In this case, instead of liquidating your fixed deposit and paying the penalty for early withdrawal, you have a more lucrative option available. You may continue to enjoy the benefits of your FD while taking a loan against it. The interest will be levied on the amount of loan taken and not on the entire amount in your fixed deposit. The maximum loan amount is 70% - 90% of the value of your fixed deposit. However, the exact amount varies across lenders.

Eligibility criteria to get a loan against an FD

Here is a list of eligibility criteria you need to keep in mind before you apply for a loan against FD.

  1. Taking a loan against FD requires holding a fixed deposit account with the bank or financial institution you are seeking a loan from.
  2. The amount in your fixed deposit should exceed the amount of loan you are applying for.
  3. If you registered for the five-year tax saver FD, you would not qualify for a loan against your deposit.
  4. A fixed deposit on a minor’s name would not be eligible for a loan.
  5. The loan’s repayment tenure cannot exceed the fixed deposit term.

Features of loan against FD

A loan against FD encompasses the following features

1.Low-Interest Rate

A loan against an existing fixed deposit entitles you to more attractive interest rates. Since the lender already has the fixed deposit amount as collateral, it becomes less risky for lenders to grant a loan. As a result, lenders may provide a lower interest rate for a loan against FD. The loan against FD interest rates is typically just 2-3% higher than the existing fixed deposit interest rate. As a result, you end up paying a lower EMI, and the overall cost of your loan goes down.

2.No need for a credit score check

The most important factor while applying for a regular loan is your credit score. Lenders usually hesitate while granting loans to individuals who have a low credit score. However, when you take a loan against FD, your credit score is not checked. Individuals with slightly lower credit scores can benefit from taking a loan against their FDs to enhance liquidity and improve their finances.

3.No prepayment penalty

Many borrowers take a loan and prepay their outstanding dues as soon as they get access to funds. A penalty usually comes with the prepayment or foreclosure of the outstanding loan amount. However, no such penalty gets imposed while taking a loan against FD. You are free to repay the loan amount whenever you want to without being levied a prepayment penalty.

4.Ongoing interest from FD

A significant advantage of taking a loan against FD is that while you are paying interest on the loan amount, you also receive interest on your fixed deposit. This makes a loan against FD a far better option than liquidating your fixed deposit amount.

5.Minimal Documentation

Since you already have a fixed deposit account with the respective bank or NBFC, you do not need a lot of added documentation while applying for a loan against FD. You may be required to submit an identity proof along with fixed deposit receipts.

6.Flexible Loan Repayment Tenure

The repayment tenure of a loan against FD can be less than or equal to the term of your fixed deposit. However, do note that the repayment tenure of the loan cannot exceed the term of the fixed deposit.

7.Wider Availability

A loan against FD is available more extensively and can be availed by both domestic and NRIs. 

How To Apply for a loan against FD?

The application process for a loan against FD is smooth and hassle-free. The loan can be applied online or offline. You may simply login into your net banking account to apply for a loan or visit the nearby branch. You will need to submit a duly filled application form, FD receipt, and the required documents to begin the loan application process.

What is an Overdraft facility?

Banks and other financial institutions may offer you the facility to withdraw more money from your bank account than your current balance. The lending institution charges a specific interest on the additional funds disbursed to you. However, interest is charged on the additional funds, not the total limit.


A loan against FD is a simple way to address your immediate liquidity needs rather than liquidating your fixed deposits or selling your assets. It provides a convenient way to access additional funds in times of need while enjoying the benefits of your current fixed deposit. Since the loan against FD possesses collateral, the terms for this loan are significantly more attractive than taking a personal loan.

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