Are You an FD Investor?

Arent FDs one of the most common and popular saving/investment avenue in our country? Surely they are. Almost everyone knows about FDs and many have invested themselves in this safe heaven, despite the not so attractive returns.

But seldom are such people aware of the loan against FD facility.. However, is it preferable to take bank FD loan instead of an l&t finance personal loan, especially if the facility to check personal loan application status is available?

Well, let’s compare these two now for you to create a simpler picture in your mind

Rate of Interest: Most banks provide personal loans with interest rates between 12 and 26 percent. On a loan secured by a fixed deposit, you just pay around 1% more interest than the deposit would have required. 

For instance, if the bank was giving 8-9% interest on a deposit with a three-year fixed rate, the interest rate on the personal loan received with the deposit would be 9-10%. This saves a large sum of money that would have otherwise been paid in personal loan interest rates as compared to a typical personal loan with no security backing.

Easy Access: A l&t finance personal loan can be applied for easily and is typically approved in less than a day. It is also simple to monitor the progress of a personal loan application by using facility of personal loan application status checker. A properly completed application form, receipts for fixed deposits, and any other paperwork the bank may need, such as an overdraft agreement and a letter of pledge or lien, must be provided by the applicant.

Processing fees: The bank does not charge a prepayment penalty for personal loans secured by FDs. However, banks charge a minor processing fee for this type of borrowing. The lender may opt to waive half of the fees, though, provided you and your bank have a history of working together. On the other hand, you should compare other costs in addition to personal loan interest rates. You should understand that there is a prepayment charge associated with a personal loan after assessing the personal loan application status.

Loan eligibility amount: The maximum amount you may borrow will depend on the value of the FD and the remaining time till maturity. Banks normally lend up to 90% of the FD amount, subject to any minimum and maximum loan amounts specified by the bank. The length of the loan would be determined by the remaining term of the FD(s) offered as collateral as well as the minimum and maximum tenure restrictions set forth by the bank. Usually, banks extend the loan term when the underlying FDs are renewed.

Why shouldn’t an early FD withdrawal be your preferred course of action?

Banks normally lend 90% of the FD amount. Rates as low as 85% are offered by some businesses, while rates as high as 95% are offered by others. If you have a 1 lakh FD, you can get a loan for any sum between 85,000 and 95,000. Imagine that you suddenly require 50,000. It would be preferable to take out a loan than to make an early withdrawal. In this way, you can pay off the debt and get your interest. 

If the three-year FD rate at the time was higher than the five-year FD rate, the bank would merely impose a fee. If your FD is likewise almost ready to mature, stay away from withdrawals. You should only withdraw the money early if your financial needs are larger than the amount of the FD and the FD has a few more years until it matures.

How am I going to pay back the FD loan?

FD loans are typically provided by banks in the form of OD. The only amount susceptible to interest payment is the sum that was consequently deducted from your limit. Up to the permitted amount, borrowers may withdraw money from their overdraft accounts and repay it as soon as they are able. In contrast to l&t finance personal loan Interest Rates, only the amount drawn will be subject to interest charges until it is repaid. You will have to pay interest on any loans you take out, which lowers your investment returns. Earning 6% on a bank FD while paying 8% on a loan backed by it lowers your effective return. So, only borrow money against an FD if you actually need it today.

Important Considerations

If you discover after monitoring the personal loan application status that you are not qualified for a l&t finance personal loan , you could choose to make an application for a loan against future dividends.

It’s important to remember that the FD must be free of liens and encumbrances and that the deposit cannot be in the name of a minor when taking out a loan against FD. If the deposit is held jointly by more than one person, such as a husband and wife, all deposit holders must sign the loan agreements.

The obligation must be repaid by each depositor. Interest will still be paid to the underlying deposit’s holder. But they must pay the EMI because the loan is secured by the deposit.

Final words…..

People save their surplus money in savings accounts for security or return-seeking purposes. Few people ever consider taking a loan on their FD. If you compare the interest rate of a loan against an FD with the interest rate on personal loans, it can be advantageous for you to do so. Additionally, it is among the quickest methods of raising money when you need it. If you are having financial difficulties and your personal loan application status indicates that you are not qualified, you might be able to get help from a personal loan secured by a fixed deposit. But you should think of it as a means of getting fast money. If you take out a loan against your bank’s fixed deposit and are unable to make your payments on time, you run the danger of losing it. In order to recoup the loaned funds, the bank will foreclose on the fixed deposit.

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