Smart Financing: Understanding FD Loan Interest Rates

loan against fixed deposit

Fixed Deposits are one of the most popular financial products in India. FDs are a great option for those looking for a secure investment option with guaranteed returns. They offer an attractive interest rate and can be easily managed online or in-person through your bank or financial institution.

Apart from providing a safe investment option, Fixed Deposits also offer loan facilities. Loans against FDs are a great way to manage your cash flow and meet unforeseen financial requirements without breaking your deposits. However, before you opt for an FD loan, it is important to understand the principles of FD loan interest rate to make an informed decision.

Understanding FD Loan Interest Rates

FD loan interest rate is the rate of interest charged by banks and financial institutions on the loan taken against your fixed deposit. The interest rate on an FD loan is usually lower than personal loans and other unsecured loans as the loan is secured against the deposit. Banks and financial institutions offer FD loans at a lower interest rate as compared to personal loans or other forms of credit, as there is no liability on the lender regarding repayment of the loan.

Interest rates on FD loans can vary depending on the amount of loan taken, tenure of the loan, and the interest rate offered by the lender. Banks and financial institutions usually offer a loan amount up to 75% to 90% of the value of the fixed deposit. The interest rate on the loan is charged on the amount the borrower has availed and not on the entire FD amount.

Factors Affecting FD Loan Interest Rates:

The loan against fd interest rate offered can vary based on various factors such as:

1. Relationship with the bank or financial institution

If you have a long-standing relationship with a bank or financial institution, you are more likely to be offered a lower interest rate on an FD loan. This is because banks and financial institutions are more likely to offer discounted interest rates to their loyal customers.

2. Credit Score

Your credit score plays a crucial role in determining the interest rate on an FD loan. A good credit score indicates that you are a responsible borrower and are more likely to repay the loan on time. A higher credit score can help you negotiate a lower interest rate on your FD loan.

3. Tenure of the Loan

The tenure of the FD loan can also affect the interest rate offered by banks or financial institutions. A longer loan tenure usually means a higher interest rate, while a shorter loan tenure means a lower interest rate.

4. Loan Amount

The loan amount taken against the FD can also affect the interest rate. Generally, the interest rate on a larger loan amount is lower than on a smaller loan amount.

5. Type of Fixed Deposit

Different types of fixed deposits offer different interest rates. The interest rate on a regular fixed deposit is usually lower than that on a tax-saving fixed deposit. Hence, if you have a tax-saving fixed deposit, you may be offered a lower interest rate on your FD loan than on a regular fixed deposit.


FD loan interest rates are lower than interest rates on unsecured loans, making them an attractive option for those in need of immediate cash without breaking their FDs. However, it is important to compare interest rates offered by different banks and financial institutions before availing of a loan against fixed deposit. This will help you get the best deal and save money in the long run.

Before availing of an FD loan, it is also important to understand the repayment terms and conditions. Failure to repay the loan on time can attract penalties and damage your credit score.

In conclusion, FD loans are a good option for those looking for a secured loan with lower interest rates. However, it is important to read the fine print and understand the terms and conditions before availing of the loan.

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