Financial emergencies are uninvited and require immediate action, and some people end up withdrawing their fixed deposit account before the maturity period. Whatever a person had planned for that fixed deposit amount, it gets disrupted. But, nowadays the bank and NBFCs have introduced a scheme where one does not need to break their FD. Instead, once can avail a loan against their FD. Availing this loan serves your requirements within a day. The process to avail this loan is as follows:
- Eligibility criteria
Before applying for any loan or investment, the eligibility criteria have to be satisfied. For this loan, the applicant(s) must be:
- Residents of India
- Family trusts
- Registered Hindu Undivided Family
- An association like a club or society
- A registered company
- Application process
Most of the banks and NBFCs allow the application process online, but sometimes one might need to visit the bank or NBFC for this purpose.
Another important point to avail a loan is to check if one has all the documentation required:
- Application signed by the person registered for fixed deposit account in the bank or NBFC
- The agreement signed by the registered person
- Fixed deposit receipts discharged in the bank or NBFC’s favour
Benefits of a loan against FD
Availing this loan against FD can be extremely beneficial, and some of the benefits that it offers are:
- Low-interest rates
For these loans, a fixed deposit account already acts as collateral and hence with no need for any other guarantee to be submitted with the bank and NBFC, the interest rate will be comparatively lower. Usually, the interest rate is 2% higher than the maximum fd interest rate.
- Suitable loan amount
Generally, when a person avails a loan, the amount that he can borrow depends on various factors like credit score, the income of the person, and many more. But, here the amount will entirely depend on the amount in fixed deposit. Hence, the higher the amount in FD, the more money one can avail from a loan against FD. Usually, it’s up to 75% of the total principal deposit.
- No penalty
On regular loans, a person is not allowed to prepay the amount or else a penalty will be charged for the interest that the bank and NBFC lost in the process. However, in case of such loans, no penalty shall be charged because banks and NBFCs will gain profit instead.
- Minimal documentation
Sometimes the approval is not as difficult as the documentation and process for a loan. The process and the documentation required is neither lengthy nor complex. As low as three documents are required for the application, and the process will take a few minutes to get completed. The loan serves the motive of immediate financial need and hence does not involve days to get approved as long as you have an FD with the bank and NBFC.
The above was a detailed process and other information that one shall know before applying for a loan against FD. This loan is an additional benefit to having money saved in a fixed deposit account.