A Fixed Deposit (FD) is a financial instrument offered by banks and financial institutions that allows customers to earn a fixed interest rate on their deposited amount for a specified period. Generally, the tenure of an FD ranges between 7 days to 10 years. An FD is an ideal investment option for risk-averse investors looking for regular returns. Apart from this, one can also avail of a loan against FD at low interest rates.
Loan Against FD Interest Rate
The interest rate for a loan against FD is generally lower than the interest rates for personal loans or credit cards. This is because the loan is secured against the fixed deposit. The interest rate charged on a loan against FD is usually 2% to 2.5% higher than the interest rate offered on the FD. The interest rate on a loan against FD can vary depending upon the bank or financial institution and the tenure of the loan. However, loan against FD interest rate is comparatively lower than other available options.
How to Avail Loan Against FD?
To avail a loan against FD, you need to pledge your fixed deposit as collateral with the bank or financial institution. Banks generally allow customers to avail of loans up to 90% of the collateral amount. The loan amount can range from a minimum of Rs.5000 to a maximum of Rs.10 crore depending upon the bank's policies. Once you apply for a loan against FD, the bank will verify your credentials and process the loan application. The loan amount will be disbursed to your account upon approval.
Benefits of Loan Against FD
One of the significant benefits of a loan against FD is lower interest rates than other loan options. Additionally, the loan processing time is also shorter as the bank has the collateral on hand and does not need to verify your creditworthiness. The loan against FD option is also ideal for individuals who do not want to break their fixed deposits and lose out on the interest earnings. It is an excellent way to meet your financial needs without interrupting your investment strategy. Read Also: Comprehensive Loan Against Shares Interest Rates
Conclusion
A loan against FD can be an excellent option for individuals who need immediate funds without breaking their fixed deposit. Banks and financial institutions offer loan against FD at lower interest rates than other loan options. However, customers must understand the terms and conditions of the loan, including interest rates, repayment period, and collateral amount. Ensure that you only take a loan that you can repay without impacting your financial health. In summary, a loan against FD is an ideal option for individuals facing financial emergencies without affecting their investments.
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