How to Get a Personal Loan against Fixed Deposit - A Step-by-Step Guide

In the current financial landscape, individuals are on the constant lookout for investment options that offer a good amount of security and stability. While there are several different options, fixed deposits, or FDs, have always been the most popular choice among Indian investors. This is a financial instrument primarily designed for those looking for assured returns over a period of time. The rate of interest is fixed at the time of investment, and you can choose the duration as per your financial goals. Another often overlooked advantage of choosing fixed deposits as an investment option is their ability to serve as collateral.

Table of Content

What Is A Loan Against A Fixed Deposit?
Eligibility Criteria
Required Documents
How to Apply?

The ultimate aim of making any investment is to gain financial security, and one question that is often asked by most investors is, ‘Can we take a loan against FD?’ So, here is the answer – yes, you can use your fixed deposit as collateral and apply for a loan.

What Is A Loan Against A Fixed Deposit?

A loan against fixed deposit, as the name suggests, is a financing option that allows you to avail a loan by pledging your FD. This way, you’ll be able to arrange funds in case of an emergency without having to withdraw your savings before it reaches maturity. Since you aren’t going to liquidate your FD and will only borrow a certain amount, you’ll be able to retain your investment benefits. Nowadays, almost every bank and NBFC gives this option to their customers.

Here are a few key advantages of availing a loan against a fixed deposit:

Lower rate of interest
Minimal documentation
Quick processing
Higher loan amount
Zero processing charges
No restriction on fund usage
Easy repayment
No prepayment penalty

While there are no disadvantages to obtaining a loan against a fixed deposit, these loans come with certain limitations, in terms of tenure. Generally, the loan tenure is the same as the maturity period of your fixed deposit.

Eligibility Criteria

The eligibility criteria for availing a loan against a fixed deposit can vary from one financial institution to another. However, a few requirements always remain the same, such as:

The applicants must be above the age of 18 years.
The applicant can be a salaried individual, self-employed professional, or businessman.
The minimum FD amount should be ₹5000.
The fixed deposit must have been opened at least 3-6 months prior to the loan application.

Required Documents

Here is a list of documents that need to be submitted while applying for a loan against FD:

Identity proof (Aadhaar Card / PAN Card / Voter ID / Driving Licence)
Address proof (Aadhaar Card / Voter ID / electricity bill / rent agreement)
Proof of income
Bank account statements for the last 6 months
Form 15G/H for exemption of TDS on interest (if applicable)
Original receipt of the fixed deposit that is being used as collateral

How to Apply?

The process of applying for a loan against a fixed deposit is quick and straightforward. Here are the steps you need to follow:

The very first step of applying for a loan is to visit the official website of your preferred bank or financial institution. From there, you can download the application form. Or, you can also visit their branch and get the loan application form.
The next step is to fill out the loan application form with your personal and financial details. Once done, it is important to ensure that all the information you’ve provided is accurate.
Now, you’ll be asked to submit documents. If you’re processing your loan application online, you can upload the scanned documents in the recommended format. For offline applications, you’ll have to submit photocopies of these documents.
After this, the lending institution will perform background verification and then approve the loan application. The loan amount is usually disbursed within a few working days of approval.

In conclusion, obtaining a loan against your fixed deposit to take care of a financial emergency can prove to be a good decision. These loans come with absolutely no hassle and are also available at lower interest rates, as compared to other popular financing options. Are you also planning to apply for a personal loan against your fixed deposit? If yes, this is where your search ends!

Muthoot Finance offers a number of loan schemes with flexible borrowing terms and competitive interest rates. You can explore all the options and apply for an instant personal loan online. Or, you can also visit your nearest Muthoot Finance branch for more information.