Fixed Deposits have been traditionally long and trusted methods for savings. Similarly, SBI, or State Bank of India has been serving the public sector since time 1955. It has also become the trusted and go-to option of Indians for any type of monetary activity, including loans. Utilizing the Fixed Deposit to get sanctioned the loans is among the multiple benefits it possesses. Taking a secured loan offers lower interest rates compared to unsecured loans. So, let us dive in to know how the loan against FD SBI is sanctioned and other related details.
What is a Loan Against FD SBI?
The SBI offers the provision to its customers to apply for a secured loan against their Fixed Deposit accounts. It does not require breaking your Fixed Deposit. Rather, it serves as the security for banks, further allowing you lower interest rates compared to unsecured loans. Since Fixed Deposits are unusable till the maturity period, taking a loan against them at lower interest rates serves as an interesting option. However, it must be understood that the bank can seize the security or Fixed Deposit in case of inability to pay back the loan. A well-thought decision is recommended before considering or finalising your decision.
Loan Against FD SBI: Eligibility Criteria
The following criteria must be fulfilled to sanction your loan against FD SBI:
- The applicant’s age must be less than 21 years of age.
- Applicant can have a single or joint FD SBI account.
- The FD must not have matured at the time of the loan application.
- Businesses must be in partnership or sole proprietorship to avail loan against FD SBI.
- Individual customers with TDR/e-TDR/STDR/e-STDR can sanction the loan.
- Individuals registered for bank deposits such as RD/e-RD/RFC/FCNR/NRE are eligible.
Particulars of Eligible Loan
The permissible loan amount against FD from SBI is from INR 25,000 to 5 crores. In general, it should be within 90% of the Fixed Deposit amount. The tenure is decided based on multiple factors, which include the borrower’s capacity. Generally, the maximum set term is about 5 years in the case of STDR and e-STDR and 3 years in the case of TDS and e-TDR.
Features of Loan Against FD SBI
- Availability as both demand and overdraft loans
- Application procedure is possible through both online and offline methods
- Available at Fixed Deposit
- Must be within 90% of the amount present in Fixed Deposit
- No processing fee
- Tenure is maximum extendable from 3 to 5 years, depending on the loan and repayment capacity.
- The interest rate is generally 1% above the relative Fixed Deposit rate, much lower than the unsecured loan interest rate.
Benefits of Loan Against FD SBI
- Instant usage of savings in difficult times
- Low interest rates compared to traditional loans and even personal loan
- The requirement of, let's say, 3 to 4 lakhs against 10 lakhs of FD will better go with a loan rather than breaking the FD. Breaking the FDs might be associated with a fine, which is generally more compared to the charges associated with loans.
- Flexible tenure and repayment options
- Cost-effective option in case of poor credit history
- No preclosure fine
Methods of Loan Against FD SBI
There are two different methods of loan against FD SBI, which are taking a loan or issuing an overdraft.
- Loan: It resembles normal loans where borrowers take up the amount in one go and pay it back through the EMIs. Generally, the interest rates in this type are 2% higher than the FD rate. The percentage change varies among banks, and it must be asked directly from the bank.
- Overdraft: Here, the applicants are offered about 90% of the amount that can be withdrawn at any time as per the requirement. The interest is charged on the withheld amount by the bank.
How to Open Overdraft (OD) Account Against FD SBI?
The option to take a loan against FD SBI is open for all types of account holders, which includes savings accounts, NRI deposits, and businesses till they meet the eligibility criteria. There are two methods for application, both online and offline. The offline method requires a visit to the branch, connecting with the bank representative, and filling in the appropriate form provided by them. The online procedure will go as follows:
Step 1: Log in to the SBI website using the personal login credentials.
Step 2: Visit the e-fixed deposit option in the bar menu at the upper part of the page.
Step 3: From the sidebar, choose the ‘Overdraft against Fixed Deposit’ option.
Step 4: You will be shown the names of individuals holding deposits. Select the appropriate option or the name. Understand further details and then ‘proceed’ to the next step.
Step 5: Carefully look for the overdraft amount available against the FD, the SBI rates incurred and the expiry date. Further, click on ‘submit’ option.
Step 6: Now, you will need access to your registered mobile number. You will be receiving a high-security password to be entered for further proceeding.
Step 7: Now, you will have an Overdraft account opened to take the money based on the provided amount and set the interest rate.
Conclusion
FD refers to Fixed Deposit, where the individuals deposit their amount for fixed tenure. They are provided with interest without the liberty to use the money till the tenure ends. In case of sudden financial needs, you can also use these funds to your aid by taking them as a loan. You will not require any credit score for the facility, and the disbursement will be immediate. Offering lower interest rates compared to unsecured loans, the FD here serves as collateral. Therefore, when taking a loan against FD SBI, it is recommended to understand your ability to pay the loan to avoid financial losses from your Fixed Deposit or other budget.