Loan Against FD: It is better to take an FD loan than break FD, know here why it is a profitable deal..
FD as Collateral for Loan: Fixed deposit is a secure investment option. Many people get FD for investment but when they suddenly need money, they break the fixed deposit (FD) before maturity. Due to this they also have to face losses.
If FD is broken before maturity, interest is less and a penalty has to be paid. In such a situation, it is advised that it is better to take an FD loan than break the FD. Today we will tell you why breaking FD is an emergency or what is the best option between FD loans.
How much interest is reduced if FD is broken before maturity?
If the FD is broken before maturity, the interest rate gets reduced. According to the website of the State Bank of India (SBI), on breaking the FD, the interest rate is reduced by 1 percent.
For example, if 6 percent interest is being given on FD and the investor breaks the FD in 6 months, then he will get interest at 5 percent. Apart from this, he will also have to pay a penalty.
How much is the penalty?
The penalty rate of all banks is different. According to SBI rules, a penalty of 0.50 percent is imposed on FDs up to Rs 5 lakh. Whereas on FD up to Rs 1 crore, this penalty becomes 1 percent. After deducting the penalty and interest, the bank returns the remaining amount to the investor.
How much interest is charged on an FD loan?
It is better to take an FD loan rather than break the FD. Investors can take a loan up to 90 percent of the total FD amount. Understand it this way, if you have made an FD of Rs 1 lakh, then you can take a loan of Rs 90,000.
You will have to pay 1 to 2 percent interest on this loan. That is, if 4 percent interest is being given on FD, then the investor has to pay interest at the rate of 5 to 6 percent on the loan.
If the investor does not repay the loan amount, then when the FD matures, the bank deducts the loan amount. After deducting the loan amount, the amount left is credited to the investor's account.
Why is an FD loan a good option?
It is better to take a loan in times of need rather than break your FD. However, if you need less money then taking a loan will be beneficial for you. At the same time, if more money is needed then breaking FD is a good option.
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