Loan Against FD: Benefits, Interest Rates & How to Apply
In today’s era, the most stable person is not the one who has a lot of money, but he is the one who has a strong financial mindset. People tend to save money in order to spend it in times of need. But the stored money will not give any advantage if not utilised properly. But if you ask a financial advisor, I will recommend that you invest your savings as a fixed deposit and get various advantages from it.
The loan against fixed deposit (FD) is the most appropriate loan for individuals in India who require money immediately, but do not wish to disturb their fixed investments. It is a secured loan in which you can borrow without any early withdrawal charges since your current FD is collateral. It is provided by major banks such as State Bank of India (SBI), HDFC Bank, ICICI Bank, and Axis Bank. It ensures that your FD continues to generate interest and thus, it is a low-risk and affordable method of covering your emergencies, business requirements, or personal spending.
Loan Against FD Benefits
There are a lot of advantages to a loan against FD, particularly in the low-interest-rate market in India. It allows you to maintain your savings and, at the same time, deal with critical financial issues. Since this loan also involves monthly repayments, understanding what EMI means and how it works is important before borrowing. The following are some of the significant advantages of borrowing money through a loan against an FD:
- Reduced Interest Costs: The Interest rates are typically lower by 1% to 2% (maximum 3%) compared to your FD rate, which is much less expensive than unsecured options.
- Fast Approval and Disbursal: Approval is fast, with FD as collateral, also instant in most cases, or within a few days, with very little paperwork.
- None or minimal credit score check: It is the FD collateral that gets you approved, and not a lengthy credit history.
- Continued FD Earnings: Your fixed deposit earns interest over the life of the loan, regardless of the loan you have taken.
- Large Loan Value: You can borrow a large amount of 90-95% of the FD value, and this will provide a lot of money without selling any assets.
- Flexible Repayment: You have a choice of either overdraft (just pay interest on what you use) or take a term loan, and repayment is often made when the FD matures.
These advantages of borrowing a loan as compared to an FD are particularly useful for the salaried employees, retiring employees, and individuals who already have FDs in Indian banks. You can easily estimate your monthly payment using an EMI calculator before finalising the loan amount.
FD Loan Interest Rates
Indian FD lending rates are competitive, and they are based on the currently held FD rate. By January 2026, with recent changes in the RBI repo rate to 5.25%, the general citizens are offered an FD rate of about 6-7% by the major banks (with higher rates given to the seniors), with a loan rate of about 1-2% higher than that.
To illustrate, when your FD is earning 6.5%, the loan may cost 7.5-8.5%. Interest rates change depending on the bank.
The following table provides a summary of approximated FD loan interest rates of some of the Indian banks (indicative only until early 2026; check with the bank):
| Bank | Approximate FD Rate (p.a.) for 1-5 Years | FD Loan Interest Rate (p.a.) | Loan Tenure Options |
| SBI | 6.25-6.60% | 1-2% above FD rate (e.g., 7.25-8.60%) | Up to FD maturity (overdraft/term) |
| HDFC Bank | 6.25-6.75% | 1-2% above FD rate | Overdraft facility, flexible |
| ICICI Bank | 6.40-6.60% | 1-2% above FD rate | Up to FD maturity |
| Axis Bank | 6.50-7.00% | 1-2% above FD rate | Overdraft or demand loan |
Note: Senior citizens often get 0.50% extra on FDs, influencing loan costs. Rates are lower due to collateral security. To compare real costs, check EMIs for both options using a personal loan EMI calculator.
Loan Against Fixed Deposit vs Personal Loan
Comparing a loan to a fixed deposit with that of a personal loan, you will find that the FD loans are cheaper and easier to acquire if you have some savings. Personal loans provided by banks such as HDFC, ICICI, and Bajaj Finserv are not secured and require income and a credit score, which makes them more costly.
Individuals who lack FDs or those who need larger or unlimited amounts should take personal loans, but they are riskier and charge higher interest rates.
The following table presents a lot of details:
| Aspect | Loan Against Fixed Deposit | Personal Loan |
| Interest Rates | 7-9% (1-2% above FD rate) | 10-24% or higher |
| Collateral Required | Yes (FD as security) | No (unsecured) |
| Loan Amount | Up to 90-95% of FD value | Up to ₹50 lakh+ (based on income/credit) |
| Approval Time | Instant to a few days (collateral-based) | 1-7 days (credit checks required) |
| Documentation | Minimal (ID, FD details) | Extensive (income proof, statements, etc.) |
| Impact on Savings | FD continues earning interest | No direct impact, but higher EMIs |
| Eligibility | Must hold FD with the bank | Based on salary/income and credit score |
| Risk of Default | Bank can adjust from FD | Impacts credit score, potential legal action |
In short, if you possess an FD, the secured method is less risky and cheaper. Flexible personal loans are for those people who do not possess collateral.
How to Apply for FD Loan
Borrowing money against your FD in India is not a difficult thing, particularly when it is with the same bank. Most of them have web-based systems to simplify things. To apply for an FD loan, use the following steps:
- Check Eligibility: You must have an active FD (minimum amount of 10,000-25,000) and the minimum requirements (be 18 years old and an Indian citizen).
- Select Your Bank: Select the bank where you are having FD, like SBI, HDFC, or ICICI, and take the best terms.
- Get Your Papers: Prepare your PAN / Aadhaar, FD certificate/receipt, and application form (at least in the case of most individuals).
- Apply: You will need net banking or a mobile app (such as SBI YONO or HDFC NetBanking) or visit a branch. Most of them allow you to open an overdraft.
- Verification and Approval: The bank validates the FD and approves it on the spot, typically placing a lien on the deposit.
- Sign the contract: Accept the terms, i.e., interest rate and the way to repay (overdraft or demand loan).
- Access Funds: It is possible to access the money in the form of a credit to your account or over your limit.
For example, HDFC Bank super saver account and SBI overdraft account, where you can open the account online, but with other services, you might have to visit a branch to complete the process.
Frequently Asked Questions (FAQs)
What is a loan on fixed deposit?
You will be allowed to borrow up to 90-95% of the value of your FD without disposing of it, and your FD is considered a security for the borrowed amount.
How often will the FD loans in India have an average interest rate?
Rates will typically be 1-2% more than your FD rate (e.g. 7-9% per annum in 2026), but they may vary according to bank and term.
What will I be able to take with a loan on my FD?
Typically, 90% to 95% of FD money will be returned as 90, 000- 95,000 in place of 1 lakh of money deposited.
Is there any difference between taking out a loan on my FD in the interest charged on my deposit?
No, your FD continues to earn interest as normal; however, only the amount you borrowed for overdraft services earns interest.
What will happen in case I fail in repaying an FD loan?
The bank is able to revise the amount you owe on your FD maturity earnings, but it normally does not make such an impact on your credit rating as the unsecured loans.
Conclusion
A loan against a fixed deposit is an excellent method of borrowing money for those Indians who are in need of quick, inexpensive money and do not necessarily have to sacrifice the growth in savings. The current interest rates are at a reasonable level and hence will provide you with financial freedom to meet your short-term needs as your FD increases in a safe and secure manner. Proper planning helps avoid financial stress, follow these EMI budgeting tips before taking any loan. Compare offers on the market, look at what you require, then discuss your lender with him/her to give you a personalised service. You should not borrow what you may not be able to repay in the long run.
