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

Here's how the loan against fixed deposit by different banks stack up

• 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