This is very often the cheapest credit a salaried Indian can access, and almost nobody knows it exists. The rate is your deposit rate plus a small spread — commonly one to two percentage points — with no credit check, no income proof and no processing to speak of, because the bank already holds the money.
| Typical rate on a loan against FD | FD rate + 1 – 2 % |
|---|---|
| What it means | Against 11–24% on an unsecured personal loan. |
as of 2026-08-15 · Bank tariff schedules · reported
What to know
Compare it against the instinct to break the deposit. Premature withdrawal usually costs a penalty and, worse, the deposit is recomputed at the rate applicable for the period it actually ran — so a five-year FD broken at year two earns the two-year rate, retrospectively. Borrowing against it at a small spread for a few months is frequently cheaper than losing that rate differential permanently. Because the spread is quoted over your own deposit rate, the rate you booked the FD at sets the cost of the loan — best FD rates is worth reading before you open the deposit, not after.
It is typically offered as an overdraft against up to 90–95% of the deposit value, with interest charged only on what you draw. That makes it an excellent standby facility: set it up against an existing deposit and leave it undrawn, so the emergency line is already in place before the emergency. The mechanics are the same family as any other secured line — see overdrafts and credit lines for how the drawn-balance interest works.
Run the comparison rather than assuming. Price the alternative at the rates on personal loan interest rates, and work out what breaking the deposit would actually cost you using the FD calculator. If the asset you would rather pledge is shares or mutual funds instead of a deposit, loan against securities works the same way with a different collateral.
Frequently asked questions
Is a loan against FD better than breaking the FD?
Usually, for a short need. Breaking the deposit costs a penalty and recomputes your interest at the rate for the shorter period actually run, permanently. Borrowing at your FD rate plus one to two percent for a few months is often the cheaper outcome.
How much can I borrow against a fixed deposit?
Commonly up to 90–95% of the deposit value, as an overdraft with interest charged only on the amount drawn.
Does a loan against FD need a credit check?
Generally not — the deposit is the security, so the bank is not taking credit risk. That also makes it one of the few routes to credit for someone with no credit history at all.
Sources
- Lender published rate cards — Home, personal, vehicle and education loan rate cards — August 2026 — as of 2026-08-15
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