Personal Loan Vs. Loan Against Fixed Deposit: Which One You Should Apply For
October 28, 2022

In today’s lifestyle, liquidity management is imperative handling unexpected financial emergencies is not always manageable. Borrowing money is the first thought that appears when managing a financial problem.

Though meeting loan requirements is not as easy as it seems, you can contact Your Loan Advisors, leading Personal Loan Consultants in New Delhi, who can help you to process a Personal Loan that covers your needs.

Savings in the form of a Fixed Deposit can also help you save the day A loan is readily granted against a Fixed Deposit by most Banks. Therefore, instead of prematurely withdrawing a fixed deposit, you can get a loan against it and cover your financial needs.

Which is a better option? Let us discuss the major features, pros, and cons to get a clearer picture.

Interest Rate

The interest rate for a Fixed deposit is 2% to 3% more than the current Fixed Deposit rate. In effect, the higher the return on the Fixed deposit, the more you pay for the loan. With a fixed deposit rate of 7% to 8% currently, a loan will be charged up to 11% per annum.

The current interest rate for a Personal Loan is levied at 10.25% to 18%, charged at a reducing balance. It varies from financer to financer and is subject to change.

Consider the rates, the personal loan rate being charged per your profile, and the interest you will pay for a loan against your fixed deposit before finalizing.

Loan Amount

The Loan amount issued against a Fixed Deposit will be determined by the amount you invested and the pending tenure. The loan amount cannot be more than the Fixed Deposit and the EMI over your monthly income.

Personal Loan eligibility is calculated per income, employer, and obligations if the EMI is affordable. The applicant can check the EMI using the EMI Calculator.

The fixed deposit and the EMI suitable loan amount required should be covered.

The Loan Tenure

The tenure granted for a loan against the fixed deposit depends on the period the loan must be repaid before the maturity date. If the date is closer, the loan amount granted will be as per the affordable EMI.

The tenure for a Personal Loan extends from 12 to 72 months, fixed as per the applicant’s requirement and the financer’s policy.

Documents Required and Processing

The documents required for processing a loan against a fixed deposit are the updated KYC documents. which include residence and identity proof.

The customer will have to visit the branch to complete the formalities physically Banks do not offer digital processing.

Personal Loan documents include income documents, bank statements, and KYC documents. A Personal Loan can be conveniently processed from the comfort of your premises. Documents can be submitted digitally and the loan is disbursed online.

Take Away

The loan against a Fixed Deposit is secured; if the customer cannot return the loan in time, the Bank can break the Fixed deposit to recover the loan amount.

While a Personal Loan is an unsecured loan based purely on the applicant’s profile and income forwarded without guarantees, the terms and conditions are applied per the financer’s policy.

If the loan amount required is minimal and for a relatively shorter period, then a Fixed deposit may be your answer. However, if the terms are unsuitable or you do not have a Fixed deposit, a Personal Loan is a solution.

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