A loan against FD is a secured credit facility that lets you borrow money against your fixed deposit without closing it prematurely. Your FD continues to earn interest while you repay the borrowed amount with applicable interest charges.
Quick overview
- Understand how a loan against FD works, including interest charges, overdraft facilities, and borrowing limits.
- Compare the benefits and disadvantages of borrowing against your FD before making a decision.
- Learn how to apply for a loan against FD through mobile banking or net banking.
- Compare a loan against your FD with premature FD withdrawal to decide which option best suits your financial needs.
An unexpected medical bill, an urgent home repair, or a sudden cash shortage can leave you scrambling for immediate funds. If you hold an FD, your first instinct might be to break it, forcing you to sacrifice hard-earned interest and pay premature withdrawal penalties. On the flip side, applying for a high-interest personal loan feels unnecessary when you already have money locked away.
A Loan Against FD resolves this exact dilemma. It unlocks instant liquidity from your existing savings without forcing you to liquidate your deposit. But before you apply, understanding how it works, what it costs, and when to use it will help you decide if it is the smartest move for your money.
What Is a Loan Against FD?
A loan against Fixed Deposit (FD) is a secured credit facility that lets you borrow money by pledging your FD as collateral. So instead of closing your deposit before maturity, you can access funds when you need them.
With an overdraft against your FD, the deposit continues earning interest under its existing terms, while you generally pay interest only on the amount you use. However, this does not necessarily apply to a term loan against an FD. The bank also places a lien on the deposit, which means you generally cannot withdraw or close it freely until you repay the outstanding amount.
This option can help you meet unexpected expenses without immediately liquidating your savings. To understand whether it suits your needs, it helps to know how the borrowing facility works.
How Does a Loan Against Fixed Deposit Work?
When a bank approves your loan against FD, it uses your deposit as security for the amount you borrow. The bank then sets a borrowing limit based on the FD’s value, deposit type, and applicable terms.
Typically, the bank charges a slightly higher interest rate on the loan than your FD return. For example, suppose your FD earns 7% interest annually, and the bank may charge 8% on the borrowing facility. Meanwhile, your FD continues earning its contracted interest, and you pay interest on the amount you actually borrow.
Many banks offer this facility as an Overdraft (OD) against an FD. Instead of receiving the entire approved amount upfront, you get access to a credit limit linked to your account. You can withdraw funds as needed and generally pay interest only on the amount used, not the full sanctioned limit.
The exact structure depends on the bank. Some lenders may offer a term loan instead, with specific repayment terms. In either case, check the interest rate, repayment conditions, and what happens when your FD matures.
How Much Loan Can You Get Against an FD?
Banks commonly offer up to 90% of an eligible FD’s value, although the actual limit depends on the bank, deposit type, and facility. Here is how three major banks structure their offerings.
| Bank | Typical loan-to-value | Typical rate over your FD rate | Notes |
| SBI | Up to 90% for eligible deposits; online limits vary by deposit type | 1 percentage point above the applicable FD rate | Online overdraft facility with a maximum limit of ₹5 crore. |
| HDFC Bank | Up to 90% of the eligible FD value | 2 percentage points above the FD rate, as specified in published overdraft terms | Offered as an overdraft linked to an eligible savings or current account. |
| ICICI Bank | Up to 90% on INR FDs; up to 85% on select FCNR currencies | 1–2 percentage points above the FD rate, as stated in the bank’s FD guidance | Available against eligible fixed deposits, with a maximum overdraft limit of ₹5 crore. |
Note: These figures reflect published product terms as of October 2026 and may vary by deposit type and customer eligibility.
The amount you can borrow is only one part of the decision. You should also consider the facility’s cost and whether it fits your repayment plans.
What are the Benefits of a Loan Against FD?
A loan against FD lets you access funds without closing your deposit. Its practical value depends on how you use the facility.
- Your FD can continue earning interest
You do not have to close your deposit to access funds. Your FD generally continues earning interest at its contracted rate while it remains pledged, allowing you to preserve the investment until maturity.
- You pay interest on the amount you use
With an overdraft, the sanctioned limit is not necessarily the amount you borrow. If the bank approves ₹2 lakh but you use only ₹50,000, you generally pay interest only on the ₹50,000 you use. This can make an overdraft useful when you need funds in stages rather than all at once.
- You can access funds without a separate unsecured loan application
Your eligible FD acts as collateral so that the bank can assess your request against the deposit and its own eligibility rules. Existing customers may be able to apply through net banking, or a mobile app. Approval and access depend on the bank’s process and the FD’s eligibility.
Before choosing this option, consider its limitations as well.
What are the Disadvantages of a Loan Against FD?
A loan against FD gives you access to funds, but it also creates a repayment obligation. Consider these limitations before pledging your deposit.
1. Borrowing costs can reduce your net returns
The loan interest rate is generally higher than the interest rate your FD earns. Even though your deposit continues to earn interest, the difference between the two rates creates a borrowing cost. The longer you carry the outstanding balance, the more interest you may pay.
2. Your FD is not freely accessible while it is pledged
The bank places a lien on your deposit as security. You generally cannot close or withdraw the pledged FD while the facility remains outstanding. If you need the deposit for another purpose, you may first have to repay the borrowing.
3. Your repayment is linked to the FD’s terms
You still need to repay an overdraft, even if it does not follow a conventional EMI schedule. If your FD matures while an amount remains outstanding, the bank may require repayment or adjust the dues against the maturity proceeds, according to the facility’s terms. Therefore, align your repayment plan with the FD’s maturity date.
Once you understand the trade-offs, the next step is to check whether you and your FD qualify.
Eligibility Criteria for a Loan Against FD
Because your FD secures the credit facility, eligibility largely depends on your deposit and account with the bank. You must meet these criteria:
- The FD must be held with the lending bank. Banks generally offer this facility against deposits held with them.
- Your FD must be eligible for pledging. Tax-saver FDs and certain other deposit types may be excluded or subject to specific conditions.
- The FD must meet the bank’s minimum requirements. Banks may set minimum deposit amounts and tenure requirements for this facility.
- Your FD’s ownership and booking method matter. Online applications may be limited to single-holder deposits booked through eligible channels. Jointly held or branch-booked FDs may require an in-person application.
- You must meet the bank’s verification requirements. The bank may check your KYC details and confirm that the deposit meets its lending criteria.
Eligibility conditions vary by bank and deposit type. You should confirm the requirements with your bank before applying. Once your FD qualifies, you can proceed with the application.
How to Take a Loan Against FD?
Many banks let eligible customers apply through mobile banking, net banking, or a branch. The exact process varies by lender. The steps below illustrate ICICI Bank’s digital application process.
Via Mobile Banking App
- Log in to your bank’s mobile app: Open the app and sign in to your account.
- Navigate to the FD section: Go to Accounts and FD/RD.
- Select the overdraft option: Tap on OD Against FD.
- Choose your FD: Select the fixed deposit you want to link to the overdraft facility.
- Enter the overdraft amount: Specify how much you want to borrow.
- Accept the terms and conditions: Review and agree to the applicable terms.
- Review your details: Check the information you have entered before proceeding.
- Authenticate your request: Enter your Grid Card Authentication (GCA) details to confirm the transaction.
Via Net Banking
- Log in to net banking: Sign in to your bank’s internet banking portal.
- Open the deposit section: Navigate to Bank Accounts > Deposits.
- Choose the overdraft facility: Click on OD Against FD and select Avail Now.
- Select your FD and amount: Choose the fixed deposit for the overdraft and enter the required amount.
- Review the details: Check your application information carefully.
- Authenticate the request: Complete the required Grid Card Authentication (GCA).
- Submit your request: Submit the application to complete the process.
The exact menu names and authentication steps may vary across banks. Before applying, check your FD’s eligibility, the maximum overdraft amount available and the applicable interest rate.
Loan Against FD vs Breaking an FD
When you need money urgently, breaking your FD or borrowing against it can both help you access funds. However, each option comes with a different cost.
| Factor | Loan Against FD | Breaking an FD |
| Access to funds | Lets you borrow up to the approved limit against your FD | Gives you the proceeds from closing the deposit early |
| Impact on FD | The deposit generally remains active and earns interest | The deposit closes and stops earning interest for the remaining tenure |
| Cost involved | You pay interest on the amount borrowed | The bank may recalculate interest and apply a premature withdrawal penalty |
| Repayment | You must repay the amount borrowed and applicable interest | There is no borrowing to repay |
| Best suited for | Short-term needs when you expect to repay the borrowing comfortably | When you need your own funds and premature withdrawal costs less than borrowing |
Final Thoughts: Should You Opt for a Loan Against Your FD?
To compare the two options, ask your bank how much you would receive if you closed the FD today. Then calculate the interest you would pay on a loan for the period you expect to need the money.
If you need funds briefly and can repay the amount soon, borrowing against your FD may help you preserve the deposit. If repayment is uncertain or borrowing would cost more than the loss from premature withdrawal, closing the FD may be the more economical choice.
Compare the actual costs and your ability to repay before deciding. Choose the option that meets your cash requirement at a lower overall cost without putting your finances under unnecessary pressure.
