What is Loan against Fixed Deposit
Loan against FD is a facility forwarded to investors of fixed deposit accounts. As per this facility, depositors are given the loan of up to a certain percentage of the deposit amount (85% in Axis Bank). This amount is the initial investment made by the depositor, i.e. the principal amount. The associated certificate of FD is kept with the bank until the loan amount is not repaid. In case of non-payment of the loan, the bank reserves the right to recover the same from the FD.
However, the FD account shall continue to earn interest until maturity, provided the repayment is done in time.
For example, if someone has deposited Rs. 1 lakh in an FD, he/she can demand a loan of up to Rs.85,000 (here, 85%). Here, the FD certificate is kept as a lien or security.
Who can take Loan against FD in Axis Bank
To avail the facility of loan against fixed deposit, the pre-requisite is to have an FD in the Axis bank, i.e. if one has a fixed deposit account in Axis Bank, he/she can apply for a loan against the same.
How much loan can be taken
Axis Bank provides this facility for up to 85% of the deposit amount (excluding interest). This means that if someone has an FD of Rs. 1 lakh, he/she can get a loan of up to Rs. 85,000. There is also a lower limit set at Rs. 25,000, i.e. loan for less than Rs. 25,000 is not granted under this facility.
Axis Bank, along with loan facility against term deposits, also extends the overdraft facility. Depositors can avail it by opening an OD Account. Along with this account, the bank provides a chequebook, ATM card as well as access to internet banking. Using these, one can draw the required amount up to the overdraft limit whenever required. This facility is granted for 3 months minimum.
Benefits of Axis Bank Loan against FD
The following listed are benefits of availing the facility of loan or overdraft against FD with Axis Bank:
- Interest is charged on the amount utilized for the tenure only; EMI’s or postdated cheques are not required
- Overdraft facility is available for the remaining tenure of the FD (minimum 3 months), with an option to renew
- There are no pre-payment charges involved
- Axis Bank allows premature withdrawal of any fixed deposits, provided that the account holder does not have overdrafts against the deposit
Charges or fees charged on Axis Bank Loan against FD
- No prepayment charges
- No processing fees
- No renewal charges (of overdraft facility)
- Interest charged @ 2% above the Axis Bank FD rates
- Zero charges on cash withdrawal from the home branch