Personal financing is the most important aspect of everyone’s life especially when it comes to maintaining the liquidity. Managing cash flow properly is of utmost importance as it protects you from landing into financial troublesduring emergency. Disciplined financial lifestyle and careful decision-making can help you in achieving your monetary goals successfully. Ups and downs are part and parcel of life so we should always be prepared for the worst situation.
A sudden money requirement can force you to sell your assets or borrow money from others. But if you have proper saving or investment sources, you can manage the finances easily without going into the embarrassment of borrowing money from others or selling your personal assets.
You don’t have to break your investment source or fixed deposits for raising short term emergency fund, instead, you can just Apply for a Personal Loan against your FD. This way neither your savings will go away nor will you need to borrow it from others.
Also, you can enjoy comparatively lesser Interest Rate on Personal Loan against FD as compared to any a regular unsecured Personal Loan.
It is easy to get a Personal Loan against FD as it does not require a very good Credit Score, heavy documentation or strict eligibility criteria. Most of the banks consider your Fixed Deposits as collateral and keep it as security in return for sanctioning a Loan.
Fixed deposits are still considered the major source of investment for Indian masses as it provides easy growth of your money without doing much effort and also it comes with a number of advantages. Most of the banks easily lend Personal Loan against FDs, including SBI Personal Loan, Oriental bank of Commerce, HDFC Bank, South Indian bank, ICICI Bank and Axis Bank. Personal loans against your investment as FD can be taken both on domestic as well as on NRI Fixed Deposits.
Benefits of taking a Personal Loan against your investment
The interest rate on Personal Loans taken against your investment as FD is lower as compared to other collaterals. If the interest will be lower, certainly EMIs will also be lower and therefore will put less pressure on you to clear the debts.
No Processing Fee
There is absolutely no processing fee charged by many of the banks for a Personal Loan taken against your investment. Some of the banks may charge a minimal amount of processing fee but it is definitely much lesser than the processing fees of other loans.
Hassle-free Application Process
The Personal Loan applied against Fixed Deposit needs less time to get approved. The whole process from applying to sanctioning is comparatively much easier and hassle-free as compared to other types of loans. Also, less documentation and paperwork is involved in these types of Personal Loans.
No Need to Break FD
What can be better than generating the same amount of interest on your FD without breaking it and simultaneously taking a loan against it? So basically it means, you will be getting interest in loan tenure. Taking a loan against FD is always a better option than applying for an emergency unsecured loan.
Features of Personal Loan taken against investment
Loan Amount- The loan amount totally depends on the amount you have kept in your Fixed Deposit. The maximum loan amount can be up to the maturity amount of FD.
Loan Tenure- Ideally loan tenure should be the same as the maturity tenure of FD. However, one can take a loan for a lesser period than the total maturity tenure of FD.
Eligibility- Any account holder in a bank having a Fixed Deposit with that bank is eligible to take the Personal Loan against FD. The account can either be a single or joint account.
Interest Rate- The interest rate on a Personal Loan taken against FD is generally 2-3% higher than the interest rate of FD.
Processing Fees- There is no processing fee for these types of Personal Loans except with some lenders that charge a minimal rate of up to 1% as a loan processing charge.
Collateral-Your Fixed Deposit acts as collateral for the required Loan.
Documents required- There will be no need of multiple documents as the borrower is already an existing customer of the bank and bank already has the applicant’s information required in advance.
With interest rates on loans rising day by day, many would still prefer selling their owned assets than paying higher rates on Personal Loans, particularly on wet days when they badly need the money for emergency. But, we procure Fixed Deposits for emergency and we do not want to liquidate them for small cash gaps.
Herein, using the FD as collateral to raise immediate loan and that too without losing the sum of FD, is a more attractive option. You save your Fixed Deposit for long term financial goals. Availing a Personal Loan against FD is affordable as the rate of interest is comparatively low. Moreover, you can continue earning interest from your FD without breaking it. You may further use an overdraft facility on your FD that allows you to withdraw more than what you have deposited.
Herein, you must also know that you cannot break your FD after availing loan against it on account of ‘right to lien’ clause of the banks. Also, you will not be eligible for any sort of tax benefits for interest paid on this loan.