Fixed deposits (FDs) are a great way to grow your savings, but what if you need quick access to funds? An Overdraft Against Fixed Deposit is an excellent option that allows you to borrow against your FD without breaking it. This financial product offers the flexibility you need for managing your finances while continuing to earn interest on your deposit.
What Is an Overdraft Against Fixed Deposit?
An overdraft against a fixed deposit is a credit facility that lets you withdraw funds up to a specified limit against your FD. The amount you can borrow typically ranges from 80% to 90% of the total value of your fixed deposit, depending on the bank’s policies. This allows you to access cash quickly without having to liquidate your FD and lose the interest earnings.
Key Benefits of Overdraft Against Fixed Deposit
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Immediate Liquidity: The primary advantage is instant access to cash when you need it, which can help you handle unexpected expenses or emergencies without disrupting your savings.
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Interest Rate Advantage: The interest rates on overdrafts against fixed deposits are generally lower than unsecured loans or credit cards. This makes it a cost-effective borrowing option.
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Retained Interest Earnings: Your fixed deposit continues to earn interest while you utilize the overdraft facility, ensuring that your savings grow even when accessing funds.
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Flexibility in Usage: You can withdraw funds as needed, and you only pay interest on the amount you use, making it a flexible financial tool.
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No Prepayment Penalty: Many lenders do not charge a prepayment penalty, allowing you to repay the overdraft at your convenience.
Eligibility Criteria
To avail overdraft against FD, you typically need to meet the following criteria:
- FD Holder: You must be the account holder of the fixed deposit from which you wish to avail the overdraft.
- Minimum Deposit Amount: Most banks require a minimum FD amount, which can vary based on the bank’s policies.
- Age Requirement: Applicants generally need to be at least 21 years old and meet other identification criteria.
Fees and Charges
While the overdraft facility is beneficial, it’s essential to understand any associated fees and charges:
- Processing Fee: Some banks may charge a nominal fee for processing the overdraft application.
- Interest Charges: Interest is charged only on the amount utilized, usually at a rate lower than personal loans.
- Renewal Fees: If applicable, check if there are any renewal fees once the overdraft facility expires.
How to Apply for Overdraft Against Fixed Deposit?
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Visit Loanpe website: You can apply for the overdraft facility directly through their online banking portal.
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Documentation: Typically, you will need to provide identification and details of your fixed deposit, along with any other required documents.
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Loan Processing: Once your application is processed, you will receive a limit based on your FD, and you can start utilizing the funds as needed.
What is an Overdraft Against Fixed Deposit (FD)?
An Overdraft Against Fixed Deposit is a facility where you can withdraw funds beyond your account balance by using your FD as collateral. This allows you to access funds up to a certain limit without breaking your FD prematurely.
How much can I withdraw under an Overdraft Against Fixed Deposit?
Typically, you can withdraw 75% to 90% of your FD’s value, depending on the bank’s policy. This limit may vary across financial institutions and is subject to the terms and conditions of the bank.
What is the interest rate on an Overdraft Against Fixed Deposit?
The interest rate is usually slightly above the interest rate earned on your FD, making it a low-cost borrowing option. Since it’s a secured overdraft, the rates are often lower than those of unsecured loans.
What documents are required to avail an Overdraft Against Fixed Deposit?
Usually, minimal documentation is required, as the bank already holds your FD. Basic identification and account information may be needed if the overdraft is not pre-approved, but requirements may vary by bank.
