Loan against fixed deposit
People tend to take loans from various sources when there is a cash crunch. One of the sources that can be used to take loans is fixed deposits. It is generally referred to as FD. If you are planning to take short term loans, getting a loan against fixed deposits is the simplest and the easiest way. Many people tend to break the fixed deposits prematurely. Instead of doing that, people can apply for a loan against fixed deposits. If you search for Christmas Loans Manchester, loan against FD is probably the first result that you will get. In this article, we will see in detail about loan against fixed deposits. Use fixed deposit as a collateral
When we take a loan against the fixed deposits, the amount in the fixed deposits is considered as the collateral. This would be the perfect and the ideal choice for people who have a very bad credit score and who are not eligible for loans. It is because there is perfect security for the bank. Even if the person is not able to repay the loan amount, there is no issue form the bank. The amount will be deducted from the money in the fixed deposits.
An overdraft is a facility that is provided by the bank to the customers to withdraw a particular amount from their account. There are various parameters that come into play to decide the amount that can be withdrawn from the bank. Some of the important parameters are the income profile of the customer, credit score and eligibility based on the norms of the banks that will be based on the transaction history. Everyone should know that it is not a constant value. It will vary according to the change in various parameters.
The interest that will be paid for an overdraft will be higher when compared to the interest paid for demand loans. You will be paying the interest to the amount that is being withdrawn, and for an overdraft, there is no fixed duration. As long as the customer holds the money, the interest will be paid.
The loan amount granted
The loan amount that will be granted by the bank will vary between 70 to 95 percent of the total amount in the fixed deposit. The percentage will vary from bank to bank. So the loan amount is entirely dependent on the amount that is there in fixed deposits.
Low interest rates
One of the biggest advantages of taking a loan against fixed deposits is that the interest rate is very low when compared to the traditional loan. Generally, the interest rate is at least 1 to 3 per cent higher in the loan against fixed deposits.
If the loan is taken against fixed deposits, most of the banks offer flexible repayment methods, if the loan is repaid within the tenure of the fixed deposits. The loans can be paid in a lump sum or in separate instalments.