A snapshot of loan against fixed deposit by various banks with details

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  • When a person is in need of short-term emergency funds, loan against fixed deposit (FD) can work out to be  a good option

  • Interest rates are lower than on  personal loan and loan against gold
  • There is no processing fee, paperwork is minimal, it's sanctioned quickly, and repayment tenure is flexible. The borrower needs to repay it before the FD matures.
  • Your FD continues earning interest, while the loan comes at a rate that is 100-200 basis points above your FD rate. That means the effective rate of interest is just 1-2% on the loan
  • At the cost of 1-2%, it makes more sense to take a loan against FD instead of liquidating it. To liquidate an FD, most lenders will charge you a premature withdrawal penalty
  • If a credit bureau doesn't have your profile because you never had a credit card or have never taken a loan, loan against FD can help build your credit profile
  • But taking a loan against FD cannot help much to improve your credit score. “Credit bureaus assign a lower weight to loan against FD as it doesn't require credit profile evaluation,” says Arun Ramamurthy, director, Credit Sudhaar