Is it a good idea to take a loan against FD?

I am 37 years and reside in Hubli. I earn INR 50,000 a month. I have savings of INR 12 Lakhs in FD’s. Because of a family medical emergency I need a loan of INR 14 Lakhs. I have decided to take a personal loan. My friend has advised against it and asked me to take a loan against FD. Is this a good idea? I badly need the money.

Asked by : Chandru - Hubli | 282 Views

This is a very good idea. You can get a loan against FD up to maximum of 90% of its value. You get this loan as overdraft against the FD. You get this loan at much lower interest than a personal loan which charges a very high interest as there is no collateral/guarantee. Loan against FD charges interest, which is around 2-2.5% higher than interest paid by the bank on the FD. The tenure of the loan (Time period you borrow the money) depends on the maturity of the fixed deposit. You can easily get INR 9 to 10 Lakhs against FD. You can always liquidate your entire FD to pay for the medical emergency instead of loan against FD, but you may find it difficult to inculcate the discipline required to rebuild your FD again. In these days of high medical expenses, we hereby advise all the people to have proper health insurance cover for self and family.