You need ₹3-10 lakh and you have a fixed deposit you don't want to break. The choice: pledge the FD as collateral (loan against FD, sometimes called overdraft against FD), or take an unsecured personal loan. The first is dramatically cheaper. Here's when each makes sense.
Rate comparison
| Loan against FD | Personal loan | |
|---|---|---|
| Interest rate | FD rate + 1-2% (~7.5-9%) | 10.5 - 24% |
| Loan amount | Up to 90-95% of FD value | ₹50K - ₹40L |
| Processing fee | NIL or ₹500-₹1,000 | 1.5 - 3.5% (₹15K - ₹35K typical) |
| Tenure | Up to FD maturity | 12 - 60 months |
| Approval time | Same day (usually instant online) | 24-48 hours |
| CIBIL check | None | Yes (700+ typically) |
| Prepayment penalty | NIL | NIL on floating, 4% on fixed |
The rate gap is enormous: ~3-15% in favour of loan against FD.
Total cost on ₹3L for 24 months
- Loan against FD @ 8%: Interest only on outstanding (overdraft style). Average outstanding ~₹1.5L, total interest ~₹24,000.
- Personal loan @ 12%: EMI ₹14,122 × 24 = ₹3,38,928. Total interest ₹38,928. Plus 2% processing = ₹6,000. Total cost ₹44,928.
FD-backed wins by ~₹21,000 (~47% cheaper).
The FD-break alternative — when it beats both
Banks impose a 0.5-1% premature-withdrawal penalty on FDs. Compare:
- Break ₹3L FD earning 7%, lose 1% penalty: You keep ₹2.99L of principal + accrued interest minus ~₹3,000 penalty. Total opportunity cost over 24 months: ~₹42,000 of foregone interest.
- Loan against same FD @ 8%: ~₹24,000 of interest paid, but FD continues earning 7% — net cost ~₹3,000-₹5,000.
Loan against FD is better unless: (a) you'd otherwise pay zero interest on a 0% credit-card EMI conversion, or (b) the FD has matured and renewal is at a much lower rate.
When to take the loan against FD
- You have an FD you want to keep (long-tenure, locked at higher rates than current market).
- You need cash for 6-24 months — short to mid-term.
- You don't want a CIBIL inquiry (loan against FD doesn't pull CIBIL).
- You're self-employed without strong income proof — FD eliminates underwriting.
When to take a personal loan instead
- You don't have a sizeable FD — most banks need ₹50K minimum FD for the loan.
- The amount needed is significantly larger than 90% of your FD.
- Tenure required is >3 years and you want predictable EMI structure.
- The FD is jointly held and the co-holder objects to lien marking.
Top lenders for loan against FD
- SBI — FD rate + 1%, max 90% of FD value, instant via YONO app.
- HDFC Bank — FD rate + 2%, max 90%, instant via NetBanking.
- ICICI Bank — FD rate + 2%, max 90%, instant via iMobile.
- Kotak Mahindra — FD rate + 1.5%, overdraft facility, only pay interest on used amount.
The OD vs term loan choice
Most banks offer two structures:
- Overdraft against FD — A credit limit you can draw down and repay flexibly. Interest charged only on used amount, daily. Best for irregular cashflow needs.
- Term loan against FD — Lump-sum disbursal, fixed EMI structure. Best for known one-time expense (medical, education).
OD wins for flexibility unless your bank offers materially different rates.
Compare across personal loan lenders
If you're going the personal-loan route despite holding an FD, see our best personal loan rates round-up and use the Loan Eligibility Calculator.
Frequently Asked Questions
Will the bank break my FD if I default?
Yes. Bank holds a lien on the FD as collateral. Default triggers automatic adjustment of dues against the FD on maturity (or earlier if outstanding exceeds FD value).
Can I prepay the loan against FD?
Yes — anytime, no penalty. For OD facility, just deposit funds back. For term loan, pay lump sum and tenure / EMI adjusts.
Does loan against FD show on CIBIL?
Yes — listed as a "Loan Against Securities" account. On-time payment helps your score; default damages it like any other loan.
🧭 Compare next: compare personal loans
Loans Editor, OnePaisa Editorial
Prasanth writes on borrowing for OnePaisa — personal, home, car and business loans, and the credit-score questions that decide what a borrower is actually offered. Interest rates, processing fees and eligibility rules in his guides come from lender schedules of charges and official product pages, are cross-checked against OnePaisa's verified lender data, and are dated so readers can see how current they are. A rate that a lender publishes as a range is published here as a range, never as a single teaser number.
Work published under this byline follows OnePaisa’s editorial standards — how our guides are researched, fact-checked against primary sources, and corrected.