One should break the FD or take a loan on it, which is more beneficial? Understand the whole calculation in a minute.

Whenever there is a sudden need for money, the first thought that comes to mind is to use your savings. Most people believe that one should stay away from loans. Although this thinking is correct, in many cases taking a loan can prove to be a profitable deal for you. If you also need money and you are thinking of breaking your Fixed Deposit i.e. FD, then wait a bit. In some cases, it is right to break the FD, but in most cases, you can take a loan against the FD. Let us know about it in detail.

Suppose you have made an FD for 2 years, on which you are getting 7 percent interest. In such a situation, it is possible that the bank will be giving about 6.5 percent interest on 1 year FD. Now if you break FD when you need money, you will suffer a loss.

You will have to pay a penalty of about 1% for breaking FD before time. Some banks charge some fees in addition to this. Even if you ignore the fees, you will get only about 5.5% interest on breaking FD when needed. If you break FD very early, this interest will be even less.

If you take a loan on FD, it will be cheaper than a normal personal loan. If you are getting 7% interest on FD, then you will get a loan on it at 1.5-2% more interest. That is, you will get a loan on FD at 8.5-9% interest.

Now you will think that you will have to pay more interest in this way, but the good thing about this is that the savings you have made will be safe and will continue till maturity. That is, even though you will be burdened with a loan, you will still have savings. You will settle the loan today or tomorrow, but savings will be the support for your future.

Suppose you need 20-30% of the FD amount, then you should not break the FD at all. On the other hand, if it has been more than 6 months or a year since your FD, then do not look at it at all. If you need 80-90% of the FD amount and your FD is about to mature, then also try not to break the FD. In such a situation, arrange some money from somewhere else and you will get a loan of up to 80% on the FD.

If it has been only a few months since you made the FD, then you can break the FD instead of taking a loan. Do this also when you need a lot of money. If you need only 20-30% of the FD amount, then take a loan instead of breaking the FD. Think of breaking the FD only when you need at least 70% of the amount, that too when it has been only a few months since it was started.