Loans against fixed deposits

Loans against fixed deposits are about getting money in a relatively short time. While the main purpose of the loan is to have access to cash at any given time, this can be used for other purposes too.

The other primary benefit of LAFDs is the fact that they are generally easier to qualify for than regular loans. While all loans may be expensive as compared to bank credit, LAFDs are quite affordable compared to savings accounts.

What is a loan against a fixed deposit?

A loan against a fixed deposit is a loan taken by the bank or financial institution against your fixed deposits.

The term “loan” is used for different types of instruments like Term Loans and Revolving Loans. Loans against Fixed Deposits are used mainly to fund business projects, purchase land and other assets, etc.,

A borrower takes a loan from a bank or any other financial institution and uses it for various purposes like purchasing land, purchasing machinery and other assets, etc.,

A borrower can avail of a loan of any amount in any currency by paying interest on it. The interest charged on such loans varies from time to time depending upon market rates prevailing at that time.

The LAFD is called as "Loan Against Fixed Deposit" because it gives you access to your funds in case you need it more than one year after you have taken your FD.

This kind of loan is normally used by people who do not want to lose their deposit overnight. When they need money immediately, they can use this facility and get it without any hassle.

Why opt for a loan against FD?

Loans against FDs are offered to borrowers who have a fixed deposit with a bank. The borrower needs to repay the loan by depositing the monthly installment of the fixed deposit.

Loan against FDs is also known as home loans, home loans against FDs, home loan with a fixed deposit, LCFDA, and LCAFDA.

The interest paid on a home loan is based on a rate negotiated between the lender and borrower.

It is usually higher than that offered by a bank for a fixed deposit or for the same tenure period.

Loans against FDs are usually provided at an interest rate higher than those offered by banks for their fixed deposits. The interest rate varies depending on several factors such as the amount borrowed, tenure period, and other factors.

What are the steps involved in getting a loan against a fixed deposit?

This is a very simple and straightforward process. You will have to fill out some forms, one of which would be the application form for the bank where you have kept your fixed deposit. You will have to mention the amount of money that you want to borrow, and also specify whether it is for personal use or business use.

The second step is to get your application approved by the bank’s management team. This could take some time if you are dealing with an older bank that does not have much experience in this area. It takes about two weeks for them to send you an approval letter which means that your request has been accepted by the bank management team.

After that, you need to wait for about ten days before receiving your new loan offer from the bank management team.

During this period, it would be difficult for your new loan offer to get approved by other banks as well because they may want to see if there are any other banks offering similar low rates on loans against deposits.

Once they approve your loan offer, they will send you another letter after verifying through their system that there are no other offers available at this time from other banks offering similar rate loans against deposits

How is the loan amount calculated?

Loan against fixed deposit calculations depends on the interest rate offered by the bank to its customers. The higher the interest rate, the lower will be the loan amount. For example, if a bank offers an annual interest rate of 8% per annum, and if you deposit your money for one year, then at the end of this period you will get back only 8% of your deposit amount.

In such cases, although the loan amount may seem low in comparison to some other loans offered by banks, it is still a good option as it helps you recover your money faster than waiting for long periods of time or taking a risk with high-interest rates.

The loan amount is calculated as the difference between the present value of the principal and interest payments.

The formula for calculating the loan amount is:

  • Loan Amount = Principal + Interest (1)
  • Loan Amount = Principal + Interest (2)


  • Loan Amount = Loan Amount

How to repay the loan?

Loans against fixed deposits are a type of loan where you get access to your FD balance. This is also called an overdraft facility.

Repayment in full: You can repay the loan in full by paying off all your outstanding balances with interest. If you have more than one loan, make sure that you repay each one separately so that they don’t affect the regular repayment schedule of other loans in other banks.

Repayment over time: You can also choose to make payments on your loan over time. This means that instead of repaying it all at once, you will pay off a portion every month until all your loans are paid off completely. This is better if you find yourself unable to meet monthly payments due to financial constraints or emergencies such as unemployment or sickness.

When will the depositor not be able to get a loan against FD?

The depositor will not be able to get a loan against his fixed deposit if he:

  • Pays interest for 5 years in a row, starting from the date of maturity.
  • Loses his job or retires; and
  • Is unable to provide proof that he is still employed or retired.

A fixed deposit is an investment product by which a person deposits money with the bank or a financial institution and makes regular fixed periodic repayments of interest to the depositor on the principal amount. The term “fixed deposit” refers to any deposit that remains at the bank for a certain period of time, usually one year or more.

It is important to note that even though you may have deposited your money in FD for one year, it does not mean that you can withdraw all ur money in one go. If you want to withdraw your money from the FD after one year then you will have to pay interest for the remainder of one year.


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