Loan Against FD: FD is a very good option for secure investment but whenever there is a need of money in an emergency, many people break the FD. Investors have to face loss by breaking FD before maturity. In such a situation, FD loan is a very good option to avoid loss. Let us know which option we should select at the time of need.
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.In fact, if FD is broken before maturity, interest is less and penalty has to be paid. In such a situation, it is advised that it is better to take FD loan than breaking the FD . Today we will tell you why breaking FD in an emergency or what is the best option between FD loan?
How much interest is reduced if FD is broken before maturity?
The interest rate reduces if the FD is broken before maturity. According to the website of State Bank of India (SBI), the interest rate reduces by 1 percent on breaking the FD.
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 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 charged on FDs up to Rs 5 lakh. Whereas on FD up to Rs 1 crore, this penalty becomes 1 percent. After deducting penalty and interest, the bank returns the remaining amount to the investor.
How much interest is charged on FD loan?
It is better to take FD loan rather than breaking your 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. The amount that remains after deducting the loan amount is credited to the investor’s account.
Why is FD loan a good option?
It is better to take a loan at the time of need rather than breaking FD. However, if you need less money then taking a loan will be beneficial for you. However, if you need more money then breaking FD is a good option.
For example, if you take a loan of Rs 50,000 against an FD of Rs 1 lakh, then it is a good option, because in this you will be able to fulfill your needs and your savings will also remain.
However, if you need Rs 80,000 or Rs 90,000 then you should break the FD.
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