# Benefits of a Loan Against Fixed Deposit: A Comprehensive Guide for 2025 ![image](https://hackmd.io/_uploads/B1HIHfoYyx.png) Fixed Deposits (FDs) are a popular investment choice in India due to their safety, fixed returns, and liquidity. However, instead of breaking your FD during financial emergencies, you can opt for a loan against fixed deposit. This facility allows you to borrow against your deposit at a lower interest rate while keeping your FD intact. Let’s explore the key benefits of taking a loan against an FD, eligibility criteria, and application process, before opting for one. **What is a Loan Against Fixed Deposit?** Similar to a **[loan against property](https://www.bajajfinservmarkets.in/loan-against-property)** (LAP), a loan against fixed deposit is a secured loan. In this case, instead of your property, the lender offers funds against your FD as collateral. Since the deposit serves as security, banks and financial institutions provide this loan at competitive interest rates, usually lower than personal loans. The amount you can borrow depends on the FD’s value, typically ranging between 75% to 90% of the deposit amount. However, the loan-to-value (LTV) ratio offered may vary depending on your eligibility for the loan and the lender’s discretion. The repayment period for the loan is usually flexible and does not exceed the FD’s maturity date. **Top Benefits of Loan Against Fixed Deposits** **Lower Interest Rates** One of the biggest advantages of taking a loan against an FD is the low interest rate. Since the loan is backed by your deposit, lenders offer it at a rate 1% to 2% higher than the FD interest rate. This is significantly lower than unsecured loans such as personal loans, which can carry interest rates of 10% to 24% per annum. For example, let’s say your FD earns an interest rate of 6.5% p.a. In this case, your loan against FD might come with an interest rate of 7.5% to 8.5% p.a. This makes it a cost-effective borrowing option compared to other secured and unsecured loans. **No Need to Break Your FD** If you urgently need funds, breaking an FD before maturity results in a penalty and loss of interest. A loan against an FD allows you to access liquidity without losing the benefits of your deposit. Your FD continues to earn interest while you use the loan amount for financial needs. **No Impact on Credit Score** Unlike personal loans, where the lender evaluates your credit score before approval, a **[loan against FD](https://www.bajajfinservmarkets.in/loan-against-fd)** does not require a CIBIL score check. The deposit serves as security, making it easier to get approval. Moreover, if you repay the loan on time, it can help improve your credit history. **Quick and Hassle-free Processing** Applying for a loan against a fixed deposit is much easier than unsecured loans. Since the lender already holds your FD as collateral, the documentation is minimal. In most cases, the loan gets approved within a few hours to a day, and funds are disbursed quickly. **Flexible Loan Tenure** The repayment tenure of an FD loan is linked to the FD’s maturity date. This ensures that you have sufficient time to repay the loan comfortably without financial strain. Some banks offer repayment in EMIs, while others allow you to pay the entire amount at the end of the tenure. **No Processing Fees** Many banks and NBFCs do not charge processing fees for loans against fixed deposits, making them more cost-effective than personal loans or credit card loans. This further reduces the overall cost of borrowing. **No Prepayment or Foreclosure Charges** Most lenders allow early repayment without penalties, unlike personal loans that may have foreclosure charges. If you receive surplus funds, you can close the loan early without additional costs. **Higher Loan Amount Based on FD Value** Depending on the bank’s policy, you can get a loan amount of up to 90% of your FD value. This is higher than some other secured loan options, making it a convenient funding source during emergencies. For example, if you have an FD worth ₹5 Lakhs, you could get a loan ranging from ₹3.75 Lakhs to ₹4.5 Lakhs. **Continued Investment Growth** Since the FD remains intact, it continues to accrue interest. Even though you are borrowing against it, your money keeps growing, ensuring that you do not miss out on your investment returns. **Ideal for Short-term Financial Needs** A loan against fixed deposits is a perfect solution for short-term financial needs such as: * Medical emergencies * Business working capital * Paying education fees * Wedding expenses * Travel expenses * Unexpected home repairs Since the interest rate is lower than personal loans, it is an affordable alternative for urgent financial requirements. **Eligibility Criteria for Loan Against Fixed Deposit** While the eligibility criteria may vary slightly from lender to lender, here are the general requirements: The FD should be in the same bank where you are applying for the loan * The FD should be in single ownership (joint account holders may need additional approvals) * The minimum FD balance should meet the lender’s requirement (usually ₹10,000 or higher) * The FD should not be in a tax-saving scheme (Tax-saver FDs with a 5-year lock-in period are not eligible) * The FD should have sufficient remaining tenure to cover the loan period Do note that these are some common criteria most lenders require you to fulfil to qualify for the loan. So, these may vary depending on the loan provider you borrow from. Ensure to get a complete list of the lender’s eligibility requirements prior to applying for the loan for a smooth and seamless borrowing process. **How to Apply for a Loan Against Fixed Deposit?** Applying for a loan against an FD is a simple process that can usually be done through a bank’s digital platform or by visiting a branch. Lenders typically require basic details such as the FD account information, loan amount, and repayment tenure. Since the exact process varies, it’s best to check with the lender for specific steps and requirements before applying. **Final Thoughts** A loan against FD is an excellent financial tool for those needing quick funds without breaking their investment. With low interest rates, easy processing, and no credit score requirement, it serves as a better alternative to personal loans or credit card borrowing. Before opting for this loan, ensure that you have a clear repayment plan and compare lender policies to get the best deal. By leveraging your FD wisely, you can secure short-term funds while continuing to earn interest on your investment.