Is it possible to take loan against Fixed Deposit?

Cant see this email properly ? [View this newsletter in your browser.]( [Is it possible to take loan against Fixed Deposit?]( [Can I get loan against my fixed deposits?]( FD is one of the most popular types of investment option in India due to its numerous advantages. You can easily get a loan against your FD even if you don't have a credit score or meet any income eligibility criteria to apply for a loan. One of the main advantages of holding a Fixed Deposit (FD) is that it comes with a loan/overdraft facility. So you can secure a loan amount below your FD amount, without actually breaking it! Eligibility criteria, documents required and how to apply? In order to apply for Loan against FD, you will have go to your bank and approach your bank manager, fill the desired form and submit the important documents. Many banks such as PNB, HDFC etc... are offering online facility for loan against FD. Eligibility criteria for taking the loan against FD - • You need to have the active fixed deposit with the bank. • Applicant should be at least 21 years old • Applicant has to be resident citizen of India • Individual, sole proprietorships, societies, HUFs etc are eligible. Documents required for taking the loan against FD - • Application form • Fixed Deposit receipts • A cancelled cheque might be required if the loan is being taken from financial institutions other than banks • Duly signed agreement letter • Passport size photographs • Valid photo identity proof Let us see a video to understand it more clearly - [Click here to view media.]( Interests charged on the loan amount The [interest rates charged for FD]( loans as compared to traditional loan interest rates are very less. It is generally around 2% to 3% more than the FD interest rate. Example - Ram is having a FD worth Rs 10,00000. He is earning an interest rate of 6.5% on his FD; if he applies for loan against FD then here he will be charged an interest rate of 8% to 8.5% on the loan. The interest charged here is much less than the average loan interest rate that usually ranges from 9% to 15% (varies from banks to banks). Below is an indicative chart of different banks with interest rates on overdraft of FD Is pre-payment of loan against FD allowed? If yes, how much is the penalty charged? Yes, pre-payment of loan is allowed with no penalty charges. If you are thinking of taking loan against your FD, and you know that after few days or few months you can make pre-payment of the existing loan then you will be at profit because pre-payment is also allowed that too with no penalty charges. How long can be the loan tenure? The loan tenure against fixed deposits depends on the tenure of the fixed deposit. The loan tenure cannot be extended beyond the term of the fixed deposit and is available only for a period up to the maturity of the fixed deposits. Example - Sham wants to avail a loan on his fixed deposit (whose maturity is in 5 years). He can avail the loan only after completion of one year of FD. If he takes loan then he will have to repay the loan within the next 4 years, before the maturity of the fixed deposits. Loan against FD vs Breaking the FD The natural question here one will ask is, why not break the FD itself and use the money. Why one should apply for the loan. Let us see the difference between the both and then one can take the decision. You can see above that most of the points favour breaking of Fixed deposits, but one reason why one can think of taking the loan against FD is that the human tendency is that they repay the loan in EMI form easily rather than again creating the FD. If you break the FD and use the money, there is no compulsion for you to again save money and create the FD and it might happen that you will not have wealth at later point. However, if one takes a loan against FD, then the FD exists and one looks at the loan repayment as their primary objective and forced to pay back the money. One more reason why one can take loan against is when a person has to give money to someone and they do not want to break the FD, in that case they can tell the 3rd party that they are taking a loan and the other party and repay the money to bank at some later point of time. This structure works well because the 3rd party looks at it as a relationship between them and bank. They feel you have just helped them in your personal capacity. If you break FD and give the money as loan, its a transaction between you and the 3rd party and there is a tendency in 3rd party to not return the money on time and become very casual about it. That was all about the loan against FD .. Do feel free to ask any doubts in the comment section. [Click Here to read full article]( [Unsubscribe]( Jogoinvestor.com 203 - The Hub 11 Mayur, Karve Road, Kothrud Pune - 411038