When you are unable to arrange funds from any other source, the first thing that might come to your mind is to avail a personal loan. But since these loans are unsecured, your personal loan eligibility is dependent on your credit history, current income and ability to repay the loan. Another option can be to liquidate your fixed deposits. But that would mean parting with hard saved money.
Fortunately, there is another option that can help you raise money without bothering about your credit history and without even liquidating your deposits. This option is to take a loan against fixed deposits.
Now personal loan interest rates are quite high and can easily exceed 16%. But a personal loan against fixed deposit charge rates are just 1% to 3% more than the rate of the fixed deposit. So if your bank pays 9% on your deposit of 3 years, then the rate payable on personal loan raised against the deposit would be around 11% to 12%. This saves a lot of money which otherwise would have been paid as interest, had you taken a regular unsecured personal loan.
Banks are generally ready to give 90% of the value of fixed deposit as loan. But if the deposit has already run for some years, then bank may chose to lend more as some interest would have already accrued on the deposit in past.
It is worth remembering that in case you fail to service the loan, the bank can foreclose the deposit to recover the outstanding amount. This indirectly means that the tenure of personal loan given against the FD, will never exceed the residual tenure of the fixed deposit.
A loan against fixed deposit is a loan whereby you can raise short-term money without breaking your deposits. So, one should always look at these loans as means of raising money for urgent needs. But since it’s like any other loan, it’s clear that failure to repayment will result in loss of collateral, which is the fixed deposit in this case.
Thanks for such an important information.
Now unforeseen circumstances could not force you to liquidate your savings or selling off your assets. Take loan against fixed deposit from Bajaj Finserv and fulfill your requirements.
Hi, very informative article.
I am a prospective investor and was looking for profitable options to invest. I wanted your views about Peer to peer lending and is it a viable option to invest?
Sir
Perils of loan exceeding 90%.
If the loan amount exceeds 90%, the monthly interest on loan amount will exceed monthly interest on full FD.Hence the loan interest begins to eat away the principal of FD.if loan is prolonged, the 10% margin of principal gets eroded. On due date some extra remittance will have to be made.
Hence better don’t allow to take loan beyond 75%.
Better close FD prematurely.
Well said.
Sir
Perils of loan exceeding 90%.
If the loan amount exceeds 90%, the monthly interest on loan amount will exceed monthly interest on full FD.Hence the loan interest begins to eat away the principal of FD.if loan is prolonged, the 10% margin of principal gets eroded. On due date some extra remittance will have to be made.
Hence better don’t allow to take loan beyond 75%.
Better close FD prematurely.
Hii
Thank you for sharing such great information. It is informative,
I have subscribed to your feed which must do the trick! and Also, I’ve shared your site in my social networks!
Thanks a lot once again Have a nice day!
Hii
Thank you for sharing such great information. It is informative,
I have subscribed to your feed which must do the trick! and Also, I’ve shared your site in my social networks!
Thanks a lot once again Have a nice day!