Loan Against FD: Meaning, Benefits & Interest Rates 2026
Learn what a Loan Against FD is, how it works, and the latest 2026 interest rates. Read our full blog to understand benefits, eligibility, and smart borrowing tips.
Rajat Kulshrestha
Head of Mutual Fund Distribution
A loan against FD is one of the easiest ways to borrow money without breaking your savings. The quick approval and low interest rates attract many borrowers. Your fixed deposit stays safe and continues to earn interest, while you receive the money you need for any urgent or planned expense.
This guide explains how a loan against fixed deposit works, the interest rates, eligibility, documents, benefits, and more.
What is a Loan Against FD?
A loan against fixed deposit is a secured loan where your FD is used as security. You do not have to close the FD. It remains active and continues to earn interest. This makes it a safe choice for people who want money but do not want to disturb their savings.
Many banks offer this as a regular loan or as an FD overdraft, where you can take only the amount you need and pay interest only on the amount you use.
How Does a Loan Against FD Work?
Basically, the bank allows you to borrow a percentage of the amount invested in the loan against FD. This percentage is known as the loan-to-value FD ratio. Your FD earns interest as usual, while you repay the loan over time.
A loan on fixed deposit follows simple rules. If you do not repay the loan, the bank can recover the amount from your FD. This makes the process safe for the lender.
Loan-to-Value Ratio for Loan Against Fixed Deposit
The LTV or loan-to-value FD ratio represents the amount you can borrow against your FD. Most lenders offer up to 90% of the FD value.
Here’s a list of LTV offered by top banks:
|
Name of Bank |
Limit for % of Loan Against FD Amount |
|
Punjab National Bank (PNB) |
90% |
|
State Bank of India (SBI) |
95% |
|
Axis Bank |
85% |
|
HDFC Bank |
90% |
|
Bank of Baroda |
90% |
|
Citi Bank |
90% |
|
Yes Bank |
90% |
|
Bandhan Bank |
90% - 95% |
|
Union Bank |
75% |
|
ICICI Bank |
90% |
Suppose you have an FD valued at ₹1 lakh. You opt for a loan against an FD with an LTV of 90%. That means you can borrow a maximum of ₹90,000.
Loan Against FD Interest Rates (2026)
The loan against FD interest rate is typically linked to the FD interest rate. Here are the best rates for 2026:
|
Name of Bank |
Interest Rate Charged (In % p.a. higher than normal FD rates) |
|
Punjab National Bank (PNB) |
0.75% p.a. higher |
|
HDFC Bank |
2% p.a. higher |
|
Axis Bank |
2% p.a. higher |
|
Yes Bank |
1% p.a. higher |
|
Bank of Baroda |
1% p.a. higher |
|
State Bank of India (SBI) |
1% p.a. higher |
|
Union Bank |
2-3% p.a. higher |
Note: The interest rate can change at the discretion of the lender.
Benefits of Taking a Loan Against Fixed Deposit
A loan against an FD comes with multiple benefits, including:
- Lower Interest Rates: A loan against FD interest rate is usually lower than personal loans. That is because the pledging makes the loan secure, and lenders are willing to lend at more feasible rates.
- No Need to Break Your FD: Your investment continues earning returns while you borrow funds. There is no need to withdraw the fund prematurely.
- Quick Processing: Since the FD is used as collateral, the loan application can be processed fast.
- Flexible Repayment: Borrowers can repay in EMIs or use the FD overdraft facility and pay interest only on the utilised amount.
- No Credit Score Dependency: This type of loan is ideal for those with limited credit history or a low score, since the FD acts as security.
Disadvantages of a Loan Against Fixed Deposit
The following drawbacks must be considered:
- Lien Marked: Once pledged, the bank places a lien or block on the FD, which prevents you from making a premature withdrawal or breaking the FD, limiting liquidity.
- Limited Funding: Up to 90% of the FD can be borrowed as a loan, which still may not be sufficient for large or long-term financial requirements.
- Risk of Losing FD: In the event of missed payments, the lender will hold the right to retrieve the pending amount through the FD, and that can lead to loss of investment.
Who Can Apply? Eligibility for Loan Against Fixed Deposit
The loan against FD eligibility criteria may differ based on the lender's policy. That said, here are some common requirements:
- Age: Must be between 18 and 70 years.
- Nationality: Must be a citizen of India.
- Employment: Both salaried and self-employed individuals can apply.
- Credit Score: A good credit history with no prior loan defaults can help obtain better terms from the lender.
- FD Ownership: Must be in the applicant’s name.
Documents Required for a Loan Against FD
Most lenders need only basic loan against FD documents, such as:
- FD receipt or account number
- Identity proof (PAN, Aadhaar, passport, voter ID)
- Address proof (utility bills, Aadhaar, voter ID, or passport)
- Duly filled (digital) application form
FD Loan vs Personal Loan
Here’s a quick comparison between a loan against an FD and a personal loan online:
|
Feature |
Loan Against FD |
Personal Loan |
|
Interest Rate |
Lower (usually FD rate + 0.5% to 2%) |
Higher (10% to 24% depending on credit score) |
|
Eligibility |
Minimal; FD acts as collateral |
Based on income, credit score, employer, and so on. |
|
Loan Amount |
70% to 95% of the FD value |
Depends on credit profile; can be higher than the FD amount |
|
Credit Score Requirement |
Not needed |
Required (the higher the score, the better the rates) |
|
Repayment Options |
Overdraft or EMI |
EMI only |
|
Impact on FD |
FD stays intact but gets lien-marked |
No impact on FD or savings |
|
Best For |
Short-term cash needs at low cost |
Higher loan amounts or long-term needs |
|
Penalty Risk |
The bank may adjust the dues from the FD |
Penalty for missed EMI, no FD involvement |
Conclusion
A loan against fixed deposit in 2026 is a secure, low-cost and hassle-free borrowing option. With competitive interest rates, flexible repayment, straightforward eligibility, and minimal documentation, it remains one of the smartest ways to access liquidity without disturbing your savings.
Also Read:
- Loan Against FD vs Personal Loan – Which Is Better?
- Fake Loan App List (2026 – Apps Banned or Flagged by RBI)
Frequently Asked Questions
Is a loan against an FD a good option?
When you want to obtain hassle-free approval for loans and comparatively lower rates to meet financial requirements, a loan against FD can be a good option.
Is there any processing fee for the loan against FD?
Some banks may charge a processing fee, while others may not.
Can I take multiple loans against my FDs?
When you borrow a loan against an FD, it gets lien-marked and can’t be used for another line of credit. Once you have repaid the existing loan, only then may you opt for another one, and not at the same time.
What is the maximum tenure for a loan against FD?
The tenure can vary from one lender to another. It can never be more than the maturity period of the FD.
Rajat Kulshrestha
Head of Mutual Fund Distribution
Rajat Kulshrestha brings over seven years of experience in public markets, specialising in fundamental analysis and valuation frameworks. In his role as Mutual Fund Distribution Head, he oversees portfolio strategy, asset allocation decisions, and fund evaluation processes. On this blog, he offers structured, research-oriented perspectives on SME-listed companies, aiming to enhance financial literacy and analytical depth among market participants.
