What to do if there is a sudden need for money? Break FD or take a loan against it, know which will be beneficial.
Whenever there is a sudden need for money, most people think that their savings should be used. Most people believe that loans can cause problems, so one should avoid it. If you are also thinking of breaking Fixed Deposit (FD) to meet the need for money, then wait a bit. Let us know when to take a loan (Loan Against FD) and when to break FD.
Suppose you have made an FD for 2 years, on which you are getting 7 percent interest. In such a situation, the bank may be giving about 6.5 percent interest on 1 year FD. Now if you break the FD when you need money, then you will also have to pay a penalty of about 1 percent for breaking the FD before time. In such a situation, you will get only about 5.5 percent interest on it.
If you take a loan on FD, it will be cheaper than a normal personal loan. If you are getting 7 percent interest, then you will get a loan on FD at 8.5-9 percent interest. In this way, the savings you have made will be safe and will continue till maturity. That is, even if you will be burdened with a loan, you will still have savings.
Suppose you need 20-30 percent of the FD amount, then you should not break the FD at all. On the other hand, if your FD has been more than 6 months or a year, then do not look at it at all. If you need 80-90 percent 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 about 80 percent on the FD.
If it has been only a few months since you made the FD, then you can break the FD instead of 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, and that too if it has been only a few months since you started it.
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