Loan Against FD: Gone are the days when taking a loan was a big deal, Nowadays people have a lot of options to take a loan from. But, this hassle-free loan approval is majorly available to a person whose credit score is decent and who must have earnings every month.
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So, your loan approval chances are directly proportional to your financial history. Better financial history gives confidence to the lending bank or financial institution to lend without hesitation.
If you are a person with a low credit score, your investments can help you get a loan at a reasonable rate.
What is a loan against FD?
A loan against a fixed deposit is a secured loan, which can avail loan to fixed deposit holders against their investment. Loans against FD can be avail from banks and financial institutions.
Before taking a loan against FD, it is important to understand the various features around it. This will help You find out whether the loan option against FD suits your needs or not.
Interest rate
The interest is the most important aspect to check on before applying for a loan against Fixed Deposits. Loans against FD generally put less burden on the pocket than other options like personal or business loans. The interest rate on loans on FD is 0.75% to 2% more than the interest received on the investment amount because the FD acts as collateral, which reduces the lender’s risk, allowing them to offer lower interest rates.
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Loan amount
An investor generally takes 85 per cent or above of the deposit amount as a loan. However, some banks or financial institutions may have criteria for a minimum deposit to approve loans against FD.
Paperwork for loan against FD
The loan option against FD is processed instantly and loan approval is also a hassle-free and less time-consuming process. completed in less time. The same is true because FD acts as collateral. In such a situation, it eliminates the need for comprehensive verification of the financial history of the person taking the loan.
Collateral and Guarantors
In a collateral loan like a loan against FD, the person taking the loan retains the ownership of the FD which acts as collateral. Such loans are secured with FD, in such a situation the borrower does not need an additional guarantor, thus making the loan process simple and fast. FD continues to earn interest during the tenure of the loan at a pre-determined rate.
Repayment
The repayment terms for loans against FD are usually flexible and the borrower can repay it in installments (EMIs).
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However, repayment should be done before the maturity of the FD as well. As a result, the loan repayment tenure is fixed, which provides convenience to the borrower in his financial planning.
