What is Loan Against Fixed Deposit?
If you need money urgently but do not want to break a fixed deposit, you can borrow against it. The bank or institution that holds the deposit marks a lien on it and lends a large percentage of its value. The deposit keeps earning interest, so your net cost is only the gap between the loan rate and the FD rate.
Of all loans against financial assets, this one carries the least risk to your investment. There is no market price to fall, so there are no margin calls. Documentation is minimal and the process is quick, often available through net banking. The main constraints are that the loan period cannot normally exceed the deposit's maturity and the amount depends on the deposit size.
Loan Against Fixed Deposit at a glance
| Typical loan amount | Often up to about 75% to 90% of the deposit value, subject to a minimum and maximum |
|---|---|
| Tenure | Up to the FD's maturity date, with some overdraft limits renewed with the deposit |
| Indicative interest rate | Usually around 1% to 2% above the FD's interest rate |
| Processing fee | Often nil or small, sometimes a flat fee or a low percentage, plus taxes |
| Security / collateral | Lien on your fixed deposit, which continues to earn interest |
| Typical time to disbursal | Often same day, and in some cases within minutes through net banking |
| Loan type | Secured |
Indicative ranges based on general market practice in India. Your offer will differ. Last reviewed 3 October 2026.
Who should consider Loan Against Fixed Deposit?
- Savers who need short-term cash but want to keep their deposit and its interest rate intact.
- People who would lose interest through premature withdrawal and want a cheaper way to borrow.
- Borrowers with a limited credit history who can use their own deposit as security.
- Senior citizens with large deposits who want liquidity without disturbing their regular interest income.
Loan Against Fixed Deposit eligibility criteria
| Criterion | What lenders typically look for |
|---|---|
| Deposit holder | You must hold the FD in your own name, or jointly with consent of all holders. Some deposits, such as certain tax-saving deposits, cannot be pledged. |
| Deposit type | Regular term deposits are usually accepted. Tax-saving deposits within their lock-in period are generally not eligible. Check the lender's rules on cumulative and non-cumulative deposits. |
| Remaining tenure | The loan generally cannot run longer than the deposit. Very short remaining maturity may reduce the practicality or limit of the loan. |
| Age | Adults aged 18 or above. Minors' deposits need a guardian and often more paperwork or may not be eligible. |
| Credit assessment | Lenders usually do a lighter credit assessment because the deposit is the security. Approval still rests on the lender's own policy. |
| Relationship with the lender | Loans are often offered against deposits held with the same institution. Pledging a deposit with a different lender is less common and may need additional steps. |
Documents required for Loan Against Fixed Deposit
- Fixed deposit receipt or advice, or online deposit details
- PAN card and Aadhaar for KYC, if not already on file
- Address proof and a recent photograph, for new customers
- Loan application form or net banking request
- Lien marking consent or letter of lien
- Savings or current account details for crediting the loan
- Joint holder consent, where the deposit has more than one holder
How does Loan Against Fixed Deposit work, step by step?
- Check the deposit and its terms. Confirm the deposit type, maturity date and interest rate. Ask whether it can be pledged and what share of its value can be lent.
- Apply online or at the branch. Many institutions allow you to request the loan through net banking or an app. Others need a branch form and your deposit documents.
- Lien is marked on the deposit. The lender places a lien on the FD. You cannot withdraw or close the deposit prematurely while the lien is in place, but interest continues.
- Sanction and credit of funds. You receive the sanction terms, rate and any fees, and the amount is credited to your account. Some lenders offer an overdraft limit instead of a lump sum.
- Pay interest and repay principal. You pay interest regularly or at the end, and repay principal when you choose or at maturity. Part-payment is often allowed without penalty.
- Lien is removed on repayment. Once the loan and interest are cleared, the lien is released and the deposit returns to normal. If you do not repay, the lender may adjust the deposit.
Estimate your Loan Against Fixed Deposit EMI
Example values only. Replace them with the figures in your own offer.
Reducing-balance method. Excludes processing fees, GST, insurance and other charges.
Loan Against Fixed Deposit interest rate, fees and charges
A loan against a fixed deposit is among the cheapest forms of borrowing. The interest rate is generally a small margin over the rate the deposit earns, and fees are often low or waived. Your true cost is therefore only the difference between the loan rate and your FD rate, because the deposit keeps earning interest.
- Interest rate margin
- Typically around 1% to 2% above the FD rate. If the FD earns 7%, the loan may cost about 8% to 9%, with your net cost about the spread.
- Processing fee
- Often nil or a small flat fee, sometimes a low percentage of the loan, plus taxes. Check if it applies to online requests.
- Lien marking charges
- Usually none, but a few lenders may charge a small documentation fee. Confirm this when you apply.
- Premature closure impact
- If the deposit is adjusted against unpaid dues, premature closure rules and penalties on FD interest may apply.
- Late payment charges
- Delays in paying interest can attract penal charges. Check how interest is collected, such as monthly or at maturity.
Indicative rates as of October 2026. Figures are market ranges, not offers, and are reviewed every 90 days (next review January 2027). Your rate is fixed by the lender in the sanction letter and Key Fact Statement.
Worked example: what this loan really costs
Illustration for mutual fund units worth about 10 lakh marked under lien, using mid-range figures seen in the market as of October 2026. Your lender's Key Fact Statement will show your own numbers.
| Loan amount | ₹5,00,000 |
|---|---|
| Interest rate (reducing balance) | 10.5% a year |
| Tenure | 24 months |
| Monthly EMI | ₹23,188 |
| Total interest paid | ₹56,512 |
| Total repaid | ₹5,56,512 |
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1), with r the monthly rate. Processing fees, GST and insurance are extra; the annual percentage rate in the Key Fact Statement includes them. Check the figures in our Loans Against Assets EMI calculator.
Pros and cons of Loan Against Fixed Deposit
Advantages
- Lowest-risk collateral, with no market value swings or margin calls
- Deposit keeps earning interest while the loan runs
- Quick process with minimal paperwork, often online
- Usually the cheapest net cost among loans against financial assets
Limitations
- Loan period cannot normally extend beyond the deposit's maturity
- Deposit cannot be withdrawn while the lien is in place
- If you default, the lender can adjust the deposit against dues
- The amount is limited to a share of the deposit, so it needs a sizeable FD
Mistakes to avoid with Loan Against Fixed Deposit
- Breaking the FD instead of borrowing
- Premature closure can cut the interest you earned and add a penalty. For a short need, borrowing against the deposit often costs less overall.
- Ignoring the loan rate versus FD rate
- Your cost is the difference between the two. Check the actual spread, since some lenders charge more, and compare with other short-term borrowing options.
- Forgetting that the lien blocks maturity use
- If the deposit matures while the loan is open, proceeds may be adjusted to the loan. Plan repayment before maturity to control how the money is used.
- Using it for long-term borrowing
- A loan tied to a deposit is suited to short gaps. Using it for years can tie up a large deposit that might be put to better use.
Loan Against Fixed Deposit compared with similar loans
- Loan Against Fixed Deposit vs Loan Against Securities
- Securities loans use market-linked assets with margin calls and lower advances. A deposit loan uses a stable instrument, so it can lend a larger percentage with no market risk, but needs an actual FD and ties the loan period to its maturity.
- Loan Against Fixed Deposit vs Loan Against Insurance Policy
- An insurance loan depends on the policy's surrender value, which is often lower than the premiums you paid, and rates vary. A deposit loan is against a known face amount, so you can predict the available limit more easily.
- Loan Against Fixed Deposit vs Personal Loan
- A personal loan carries a much higher rate and needs a full credit assessment. A loan against an FD is secured, cheaper and quick, but is limited to the size of your deposit and its remaining term.
Rules and regulations that apply to Loan Against Fixed Deposit
Lenders must provide a Key Fact Statement before you sign. The loan is secured by a lien on your deposit, and if you default, the lender can adjust the deposit against the dues. Deposit insurance and interest-rate terms depend on the institution holding the FD, so check these before pledging.
Rules that protect you, with the source
- Key Fact Statement. For retail and MSME loans sanctioned from 1 October 2024, the lender must give you a KFS with the annual percentage rate and a repayment schedule before you sign, and cannot charge a fee that is not in it. RBI circular, 15 April 2024.
- Pre-payment charges. For floating-rate loans to individuals for non-business purposes sanctioned or renewed from 1 January 2026, no pre-payment or foreclosure charge can be levied. RBI Directions, 2 July 2025.
- Free credit report. Every credit bureau must give you one free full report with score each calendar year. RBI notification, 1 September 2016.
- Complaints. If the lender does not resolve a complaint within 30 days, you can go to the RBI Ombudsman free of charge. Integrated Ombudsman Scheme, 2021 · file at cms.rbi.org.in.
Loan Against Fixed Deposit: frequently asked questions
How much loan can I get against my fixed deposit?
Usually up to about 75% to 90% of the deposit value, depending on the lender and deposit type. An FD of ₹4 lakh could therefore support roughly ₹3 lakh to ₹3.6 lakh. Some institutions apply a minimum or maximum, so confirm the limit before you apply.
What is the interest rate on a loan against a fixed deposit?
Typically around 1% to 2% above the interest rate the FD earns. Because the deposit keeps earning, your net cost is roughly that gap. For example, an FD at 7% might attract a loan around 8% to 9%, though the exact rate depends on the lender.
Does my FD keep earning interest when I take a loan against it?
Yes. The deposit is not broken, so it continues to earn its contracted interest, and the lender only places a lien on it. You pay the loan interest separately. This is why the net cost of the borrowing is just the spread between the two rates.
Is a loan against an FD better than breaking the FD?
For a short need, usually yes, because breaking early cuts your earned interest and may attract a penalty. If you need the money permanently, or the loan interest spread is wide and the need is long, closing the deposit might be simpler. Compare both in rupees.
Can I take a loan against a tax-saving FD?
Generally not within its lock-in period, because such deposits cannot be pledged or closed early. After the lock-in ends, some lenders may allow it. Check the terms of your specific deposit and the lender's policy before planning around it.
What happens if I do not repay the loan against my FD?
The lender can adjust the deposit, including accrued interest, against the unpaid loan and interest, which may mean premature closure. Any balance left is paid to you. Missed payments can also affect your credit record, so repay on time or ask the lender about options.
Can I get an overdraft against my fixed deposit?
Yes, many lenders offer an overdraft linked to the FD, where you draw as needed and pay interest only on the amount used. It often suits uneven cash needs better than a lump-sum loan. Ask about renewal, since the limit usually follows the deposit's tenure.
Loan Against Fixed Deposit in your city
Local guidance, documents and an EMI calculator for 1461 cities across India.
Official sources and further reading
These guides are written from Reserve Bank of India rules and official scheme pages. Rules, rates and scheme terms change, so check the current position on these sites and in your lender's Key Fact Statement before you apply.
- SEBI. The securities market regulator, relevant to loans against shares, mutual funds and bonds.
- RBI: Key Facts Statement (KFS) for loans and advances. The Reserve Bank of India notification that tells lenders to give every borrower a plain-language statement of the full cost of a loan.
- RBI Complaint Management System. Where to take a complaint against a bank, NBFC or other regulated lender if the lender does not resolve it.
- RBI (Pre-payment Charges on Loans) Directions, 2025. Bars pre-payment charges on floating-rate loans taken by individuals for non-business purposes, for loans sanctioned or renewed from 1 January 2026.
- Reserve Bank - Integrated Ombudsman Scheme, 2021. The single complaint scheme for customers of banks, NBFCs and other RBI-regulated lenders.
- RBI: Free Annual Credit Report to Individuals. Credit bureaus must give you one free full credit report with score every calendar year.
- RBI Financial Education. Consumer guidance from the Reserve Bank of India on borrowing, fraud and your rights as a customer.
Edited by Hemant Kumar. Rates on this site are indicative ranges, not offers.
This page is general information, not personalised financial advice and not an offer. Rates and terms shown are indicative and vary by lender and applicant. Verify with the lender and read the Key Fact Statement before you sign.