Today there are many options for taking a loan. You can also take loan against bank fixed deposit. In this the FD has to be mortgaged with the bank. Banks and NBFCs give loans up to 80-90 percent of the FD amount. The advantage of taking loan against FD is that interest continues to be earned on it even during the mortgage period. The bank charges you 1 to 2 percent more interest than the FD interest rate. Therefore this is the cheapest option of loan.
Special features of personal loan
If Personal Loan Talking about it, it is an unsecured loan. This means that to take this loan you do not have to pledge any asset with the bank or NBFC. But, since it is an unsecured loan, banks charge more interest on it. Generally banks or NBFCs offer personal loans at 10 to 24 percent annual interest. The interest rate depends on the credit score and income profile of the customer. But, the processing of this loan takes a little more time.
Difference between loan against FD and personal loan
The biggest difference between personal loan and loan against bank FD is in the borrowing cost. For example, if the bank gives 6 percent interest annually on your FD, then if you take a loan on it, you will have to pay 7-8 percent interest. But, you may have to pay 10-24 percent interest on personal loan. Therefore, taking loan against FD is quite cheap. The second advantage is that even during the loan period, you keep getting interest on your money deposited in FD and your money keeps increasing.
Benefits of loan against FD
Repayment of loan on FD is easy. You can pay it in installments or pay it in lump sum. If you want to repay in lump sum, you will have to repay before the FD matures. If you do not repay the money within the stipulated time, the bank recovers its money from your FD. However, this does not have a negative impact on your credit score. EMI in personal loan is fixed. Penalty is imposed for delay in payment. This has a negative impact on your credit score.
Which of the two is more beneficial for you?
If you have a fixed deposit in the bank and you suddenly need money, then you can take a loan against your FD. This will be much cheaper. Processing of loan against FD is done quickly, because your necessary information is already available with the bank. If you do not have FD in the bank then you have the option of personal loan.