5 Benefits of Loan Against Fixed Deposit that You Should Know

Updated on Thursday, September 10th, 2026 | By IndusInd Bank

Summary

• A loan against a Fixed Deposit (FD) is a convenient way to access funds without breaking your investment.
• By pledging your FD as collateral, you can meet short-term financial needs while continuing to earn interest on your deposit.
• This type of loan often comes with faster approval, lower interest rates, minimal documentation, and flexible repayment options.

A loan against a fixed deposit allows borrowers to leverage the value of their FD and secure a loan against it without liquidating it prematurely. It offers an assortment of benefits like lower interest rates, higher loan amount, zero processing charges, flexible repayment terms, and continued interest-earning on the FD.

Fixed deposits are a popular investment instrument among investors looking to grow their wealth securely. Unaffected by market volatility and offering guaranteed returns, these accounts make for a safe investment with higher returns than a standard savings account. You can calculate these returns using IndusInd Bank FD Calaculator.

However, fixed deposit accounts offer more than just attractive returns and a steady trajectory of wealth creation. If you are seeking a loan but have a low credit score or do not possess an asset to pledge as collateral, you can obtain credit against your fixed deposit.

A loan against fixed deposit empowers individuals to borrow funds against their FD without liquidating it prematurely. If you have a fixed deposit, here are 5 major benefits you can enjoy when you secure a loan against it.

5 Benefits of a Loan Against FD

1. Lower Interest Rates

One of the most significant benefits of a loan against a fixed deposit is the lower interest rates compared to other forms of loans. Being a secured loan, the interest rate on a loan against FD is typically just 2% to 3% higher than the fixed deposit interest rate. This means if you earn an interest of 8% on your fixed deposit, you will have to pay an interest of 10% to 11% on the loan against FD. This allows you to recover a significant portion of the interest payment through the interest earned on the fixed deposit.

2. Higher Loan Amount

With a loan against a fixed deposit, individuals can typically borrow up to 90% of the total value of their fixed deposit. For example, if you have an FD of INR 10 lakhs, you can secure a loan of up to INR 9 lakhs against it. This allows you to leverage a significant portion of your fixed deposit’s value without having to liquidate the entire amount. 

3. Zero Processing Fee

Unlike other loan products that typically come with a processing fee, a loan against a fixed deposit offers relief to borrowers by foregoing a processing fee. This enables you to secure the required funds without the added burden of processing charges, making it more cost-effective.

4. Flexible Repayment

When availing of a loan against a fixed deposit, you can avail of a repayment tenure as long as the duration of the fixed deposit. However, it is important to note that while the duration of the loan can be shorter than the FD tenure, it cannot exceed it. For example, if the fixed deposit term is 5 years, the loan term can be less than or equal to 5 years, but not longer.

5. Keep Your FD Investment Intact

Another major advantage of a loan against a fixed deposit is that borrowers can secure the funds without prematurely breaking their fixed deposits. The fixed deposit account continues to earn interest, ensuring you can benefit from its returns while accessing the required funds for meeting immediate needs.

Invest Your Funds Securely with IndusInd Bank’s Fixed Deposit

Fixed deposits offer a convenient way to grow your wealth without the risk of market volatility. They also make for an excellent asset during times of financial emergencies. By opening a fixed deposit account with IndusInd Bank, you enjoy a wealth of benefits such as:

• Hassle-free instant booking: Book your fixed deposit online in just 3 simple steps using just your Aadhaar and PAN card details.
• High interest rate: Enjoy the most competitive fixed deposit interest rates in the market.
• Auto-renewal: Set up auto-renewal to continue enjoying the benefits of your IndusInd Bank fixed deposit.
• Multiple interest payment options: You can choose to receive interest payments monthly, quarterly or at maturity.
• Video KYC: Open your FD instantly with a video KYC facility.
• Tax saver FD: Book an FD for 5 years to enjoy tax benefits.

So, the next time you are seeking a loan, consider the untapped potential of your investment and explore the benefits of a loan against fixed deposit.

Conclusion

A loan against a fixed deposit offers the best of both worlds: access to emergency funds and continued growth of your investment. Since your FD remains active, you can continue earning interest while benefiting from quick and hassle-free financing. Whether you need funds for personal expenses, business needs, or unforeseen emergencies, a loan against an FD can be a cost-effective alternative to unsecured borrowing. By understanding its benefits and terms, you can make smarter financial decisions while keeping your savings intact.

FAQs

How much loan can I get against my fixed deposit?

Banks typically offer a loan amount ranging from 70% to 90% of the FD value. The exact amount depends on the bank’s policies, the FD amount and the type of deposit.

Does a loan against FD affect CIBIL score?

Yes, like any other loan, a loan against an FD can impact your CIBIL score. Timely repayments can have a positive effect whereas missed or delayed payments may negatively affect your credit score.

Is a loan against FD better than breaking the FD?

It depends. A loan against an FD allows you to meet your financial needs without prematurely closing the deposit and losing out on interest earnings or incurring premature withdrawal penalties.

Which is better, a loan against an FD or a home loan?

The better option depends on your requirement. A loan against an FD is suitable for short-term funding needs and offers quicker processing, while a home loan is designed specifically for purchasing or constructing property and typically provides longer repayment tenures and higher loan amounts.