A loan against a fixed deposit (FD) is a strategic financial tool that allows you to borrow against the value of your FD without having to liquidate it prematurely. This type of loan offers several advantages, including lower interest rates, access to a significant loan amount, zero processing fees, flexible repayment terms, and continued interest earnings on the fixed deposit.
Fixed deposits have long been a favored investment option for those seeking secure and reliable returns. With their guaranteed returns and immunity from market fluctuations, fixed deposits offer a safe haven for growing your wealth. But did you know that your fixed deposit can do more than just generate steady returns? If you need a loan but are concerned about your credit score or lack collateral, a loan against your fixed deposit could be the perfect solution.
In this article, we’ll explore five key benefits of taking out a loan against your fixed deposit and how it can be a financially prudent decision.
1. Benefit from Lower Interest Rates
One of the most compelling reasons to consider a loan against a fixed deposit is the lower interest rates. Since this is a secured loan, the interest rate is typically only 2% to 3% higher than the interest you earn on your fixed deposit. For instance, if your FD earns an 8% interest rate, the loan against it might come with an interest rate of around 10% to 11%. This means that the cost of borrowing is relatively low, and a portion of the interest you pay can be offset by the interest earned on the FD.
2. Access a Higher Loan Amount
Another significant advantage of a loan against a fixed deposit is the ability to borrow a substantial amount of money. Typically, lenders allow you to borrow up to 90% of your FD’s value. For example, if your FD is worth INR 10 lakhs, you could potentially secure a loan of up to INR 9 lakhs. This enables you to leverage the value of your fixed deposit without needing to liquidate the investment.
3. Enjoy Zero Processing Fees
When you opt for a loan against your fixed deposit, you can benefit from zero processing fees, unlike other types of loans that usually come with such charges. This makes the loan more cost-effective and ensures that you get the funds you need without incurring additional costs.
4. Flexible Repayment Options
A loan against a fixed deposit also offers flexible repayment terms. You can choose a repayment tenure that aligns with the duration of your fixed deposit. It’s important to note that the loan tenure cannot exceed the FD’s tenure. For instance, if your fixed deposit has a term of five years, your loan repayment period can be up to five years or less. This flexibility allows you to manage your finances more effectively and repay the loan at your convenience.
5. Preserve Your Fixed Deposit Investment
One of the standout benefits of a loan against a fixed deposit is that you can secure the funds you need without breaking your FD prematurely. This means your fixed deposit continues to earn interest, allowing you to benefit from its returns even as you access the necessary funds for immediate financial needs.
Maximize Your Wealth with IndusInd Bank’s Fixed Deposit
Fixed deposits are not only a reliable way to grow your wealth, but they also serve as a valuable financial resource during emergencies. By opening a fixed deposit account with IndusInd Bank, you can enjoy numerous benefits, such as:
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- Hassle-Free Instant Booking: Open your FD account online in just three simple steps using your Aadhaar and PAN card details.
- Competitive Interest Rates: Benefit from some of the highest fixed deposit interest rates in the market.
- Auto-Renewal Feature: Set up auto-renewal to continue earning interest without interruption.
- Flexible Interest Payment Options: Choose to receive your interest payments monthly, quarterly, or at maturity.
- Video KYC: Instantly open your FD with the convenience of a video KYC process.
- Tax Saver FD: Lock in your funds for five years with a tax saver FD to enjoy tax benefits.
In conclusion, a loan against a fixed deposit is an excellent way to unlock the potential of your FD without compromising on your investment. Whether you need funds for a personal emergency, a business need, or any other financial requirement, this type of loan offers a convenient and cost-effective solution. By keeping your FD intact, you continue to grow your wealth while addressing your immediate financial needs.