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Loan Against Fixed Deposits

Loan against fixed deposits

When it comes to taking out a loan, various options are available to you. You can take out a personal loan, a car loan, or even a home loan. But what if you don’t want to put your home or car at risk? What if you need money quickly and don’t want the hassle of going through a long application process?

In that case, you may want to consider getting a loan against your fixed deposit. In this article, we will explain everything you need to know about loans against fixed deposits. We will discuss how they work, who is eligible for them, and what the benefits are. So read on to learn more!

What is a loan against fixed deposits?

A loan against fixed deposits is a type of loan that allows you to use your fixed deposit as collateral. This means that if you cannot repay the loan, the bank can take possession of your deposit.

Loans against fixed deposits are typically used for short-term financial needs. They can be a great option if you need money quickly and don’t want to go through a lengthy application process.

How does a Loan against Fixed Deposits work?

In order to get a loan against your fixed deposit, you will first need to open a fixed deposit account with a bank. Once you have done this, you can then apply for a loan against the deposit.

The amount of money you can borrow will depend on the bank’s policies and the amount of money you have deposited. Typically, you can borrow up to 85% of the total value of your deposit.

The process is as follows.

  1. You approach the bank and request a loan against your fixed deposit
  2. The bank will then assess your application and determine whether or not you are eligible for the loan.
  3. The lender may request documents from you such as proof of ID, proof of residence and proof of your income.
  4. If you are approved, the bank will then release the funds to you.

How much does it cost to get a Loan Against Fixed Deposits?

The interest rate on a loan against fixed deposits is typically higher than the interest rate on a personal loan. This is because the bank is taking on more risk by lending you money against your deposit.

The exact interest rate will depend on the bank’s policies and the amount of money you have borrowed.  Typically, on average, you can expect to pay an interest rate of 11.50% per year, but you’re always going to want to check with your loan provider for the most up-to-date rates since they can change and may even offer deals!

What’s more, it’s also worth asking ‘what is the maximum loan against a fixed deposits’? The maximum is often set at 85% of your total deposit amount.

Finally, in addition to the interest rate, you will also have to pay a processing fee in addition to the interest rate. This fee is typically around 0.50% of the total loan amount. But again, it’s best to check with your bank, or chosen lender to make sure.

How long is the term of a Loan Against Fixed Deposits?

The term of a loan against fixed deposits is typically shorter than a personal loan term. This is because the bank wants to minimise its risk by ensuring that the loan is repaid quickly.

The typical term for a loan against fixed deposits is 12 months. However, some banks may offer terms of up to 36 months. 

How can I apply for a Loan Against Fixed Deposits?

Taking out a loan against a fixed deposit doesn’t have to be complicated, although it can certainly feel that way if you’re doing it for the first time. Fortunately, to make life easy here’s a step by step guide to what you’ll need to know.

  1. The first step is to approach the bank and request a loan against your fixed deposit.
  2. The second step is to fill out an application form. This form will ask for basic information about you and your finances.
  3. The third step is to submit the required documents. The documents you will need to provide will depend on the bank’s policies.
  4. The fourth step is to wait for the bank’s decision. The bank will assess your application and determine whether or not you are eligible for the loan.
  5. The fifth and final step is to receive the funds if you are approved. The bank will release the funds to you, and you can then use them for whatever purpose you need.

To apply for a loan against fixed deposits, simply follow the steps outlined above. With a little bit of preparation, you’ll be able to get the loan you need in no time.

However, before we continue, a common question that comes up is whether you need to have any special qualifications to get a loan against fixed deposits?

The answer is typically no.

Most banks will require that you have a fixed deposit account with them, but other than that, there are no special qualifications or requirements.

Of course, each bank is different, and they may have their own policies and requirements, so it’s always best to check with your loan provider before applying.

What are the advantages of a Loan Against Fixed Deposits?

There are several advantages to taking out a loan against fixed deposits.

First, it’s important to remember that when you take out a loan against your deposit, you are not losing the money in your account. The money in your account is still yours, and you can continue to earn interest on it.

Second, a loan against fixed deposits can be a great way to get access to funds quickly and easily. The application process is typically very simple and straightforward, so you can get the money you need without any hassle.

Finally, a loan against fixed deposits can be a great option if you have bad credit or no credit history and you want to avoid the high-interest rates of a personal loan.

Since your deposit secures the loan, the bank is taking on less risk, which means that they are more likely to approve your loan.

If you’re looking for a quick and easy way to get access to funds, a loan against fixed deposits may be the perfect solution for you.

What are the disadvantages of Loan Against Fixed Deposits?

As with any financial product, there are both advantages and disadvantages to taking out a loan against fixed deposits.

First, it’s important to remember that when you take out a loan against your deposit, you are essentially using your savings as collateral. This means that if you default on the loan, you could lose the money in your account.

Second, loans against fixed deposits typically have shorter terms than personal loans. This means that you will need to repay the loan more quickly. Typically, these kinds of loans will last for 12 months or less. 

Finally, depending on the bank’s policies, taking out a loan against your fixed deposit may require that you close your account. This is because the bank will place a lien on your account, which means that you will not be able to access the money in your account until the loan is repaid, especially if you’re failing to uphold your repayments.

This may mean that you will need to open a new account with another bank if you want to keep your money in a fixed deposit.

Advantages of Loan Against Fixed DepositsDisadvantages of Loan Against Fixed Deposits
Get access to money quickly.Your savings may be at risk unless you can keep up with your repayments.
You can still earn interest on the money in your savings account.Your repayment term will typically be shorter than other kinds of loans.
The application process is simple.
It can be ideal to get a loan if you don’t have a credit rating or a poor credit score.
Less risk means you’re more likely to get accepted for a loan.