Loan Against FD: Taking an FD loan is better than breaking FD, know here why it is a profitable deal.

FD as Collateral for Loan: Fixed Deposit is a secure option for investment. Many people get FDs for investment, but when they suddenly need money, they break the Fixed Deposit (FD) before maturity. Due to this, they also have to face loss.

If you break FD before maturity, you get less interest and also have to pay a penalty. In such a situation, it is advised that taking an FD loan is better than breaking FD. Today we will tell you why in an emergency, which is the best option between breaking FD or FD loan?

How much interest is reduced on breaking FD before maturity
The interest rate reduces on breaking FD before maturity. According to the website of the State Bank of India (SBI), the interest rate on breaking FD reduces by 1 percent.

For example, if 6% interest is being given on FD and the investor breaks the FD in 6 months, then he will get 5% interest. Apart from this, he will also have to pay a penalty.

How much is the penalty?
All banks have different penalty rates. According to SBI rules, a penalty of 0.50% is charged on FDs up to Rs 5 lakh. On the other hand, this penalty becomes 1% on FDs up to Rs 1 crore. After deducting the penalty and interest, the bank gives the remaining amount to the investor.

How much is the interest charged on an FD loan?
It is better to take an FD loan than break the FD. Investors can take a loan of up to 90% of the total amount of FD. Understand it like this if you have made an FD of Rs 1 lakh, then you can take a loan of Rs 90,000.

You will have to pay 1 to 2% interest on this loan. That is, if 4% interest is being received on FD, then the investor has to pay interest at the rate of 5 to 6 percent on the loan.

If the investor does not repay the loan amount, then when the FD matures, the bank deducts the loan amount. The amount that remains after deducting the loan amount is credited to the investor's account.

Why is an FD loan a good option?
It is better to take a loan at a time of need than breaking the FD. However, if you need less money then taking a loan will be beneficial for you. On the other hand, if you need more money then breaking the FD is a good option.

For example, if you take a loan of Rs 50,000 on an FD of Rs 1 lakh, then it is a good option because in this you will be able to fulfill your need and your savings will also be saved.

On the other hand, if you need Rs 80,000 or Rs 90,000 then you should break the FD.

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