Benefits Of FD: FDs Comes With Overdraft Facility, Here Are The Advantages Of Overdraft

One of the easiest methods to borrow money from the bank is to take out a loan or an overdraft (OD) against an FD. According to the bank's rules and conditions, your FD is utilised as collateral under the OD facility.

One of the best parts of taking out a loan against an FD is that your investment remains intact, and you don't have to withdraw the money early for low returns. Instead, you might use your contributions to secure the needed loan amount. You may simply apply for an overdraft against your FDs using your online banking account, or you can visit your bank office and fill out a paper application.

FD Overdraft

Typically, banks allow overdrafts of up to 90% of the current FD's value, with interest on the overdraft facility being 1-2 per cent more than the underlying FD's rate.

The benefit of taking out an overdraft on an FD is that you only pay interest on the amount of the overdraft that you use, and the interest is computed daily.

As a result, a recurring overdraft against FD can be utilised to cover a short-term cash demand. Another benefit of having an overdraft is that you don't have to worry about monthly EMI payments. You have the option of depositing the outstanding balance whenever it is convenient for you.

However, it's a good idea to pay off your overdraft interest on a monthly basis. The length of an overdraft is determined by the term of your loan. When you renew your FD, most banks enable you to renew your overdraft, and the interest rate on the overdraft is modified to match the interest rate on the renewed FD.

An overdraft against an FD might be one of the smartest borrowing instruments if your liquidity demand is transitory, such as due to a delay in salary, payment, or other reasons.

Here are the advantages oF Overdraft Facility:

No need for Credit Score

Due to poor CIBIL scores and low income, many people are unable to obtain the loan amount. In an FD overdraft case, you don't have to meet any of these requirements. You only need to hold an FD at the bank to qualify for the loan. One of the numerous reasons why so many individuals choose the same is because of this. There are numerous more benefits to taking out a loan on an FD. This post is for you if you're wanting to get your demands met by using this loan facility and want to learn about all of the perks it has to offer.

No Documentation and Quick Disbursal

The best part about a loan on an FD is that you may have the loan or overdraft amount you need in your bank account quickly and easily because there is no paperwork involved. You will not be required to provide any more documents because the lender already has all of your KYC information. As soon as the authentication process is completed, the funds will be available in your account within 24 hours.

Processing Fee and Other Charges

One of the biggest benefits of this loan on an FD is that you won't have to pay any processing fees in order to get the money into your account. This assists you in lowering the total cost of the borrowed loan. You also won't have to pay any additional fees, such as foreclosure or prepayment fees, on this loan. You can pay off your loan at any time during your term.

Lower Interest Rates

The reduced interest rates on FD loans are one of the main reasons why so many people choose this option. Because it is a secured loan, your FDs will serve as security or collateral against the loan amount you will receive. As a result, compared to other unsecured loans, the interest rates are substantially cheaper.

Lenders often provide interest rates that are 1% to 2% higher than the interest rates available on your FD plan. As a result, depending on the interest rates offered on their FD, it may vary from one lender to the next.

Higher Loan Amount

The loan amount might range from 80 per cent to 90 per cent of the overall FD value. As you can see, the size of the loan is determined by the value of your FD. The greater the amount of your FD, the greater the amount of your loan. It also relies on the type of your connection with your lender, aside from the FD Value.

Flexible Tenure

You must be analysing the term of the FD loan? One of the benefits of this loan is that you may pick a tenure up to the length of time until your FD matures. In any case, it can't be longer than your FD tenure. With such a flexible and extended repayment period, you may simply return the loan amount using simple EMIs or an Interest-Only arrangement at your leisure.

Bottom Line

With the aid of a Loan on an FD, you may get out of whatever financial bind you're in right now, and at low-interest rates. This is one of the fantastic lending options offered by most banks and financial organisations, allowing you to quickly obtain the loan amount. The overdraft facility you choose should be dependent on the amount of money you need, the interest rate, and the length of time you need the money.