Short answer: A loan against FD is a secured loan where you borrow against your fixed deposit (up to around 90 to 95 percent of its value) at a low rate, usually just 1 to 2 percent above your FD rate, with minimal credit checks. A personal loan is unsecured, needs no collateral, but charges a higher rate and depends on your credit score. If you have an FD and want the cheapest borrowing, a loan against FD wins; if you have no FD or want to keep it untouched, a personal loan works.
Need funds but have money locked in a fixed deposit? You may not need to break it. Here is how the two options compare.
The core difference
- A loan against FD is a secured loan. The bank places a lien on your fixed deposit and lends you a percentage of its value. Your FD stays intact and keeps earning interest.
- A personal loan is an unsecured loan. There is no collateral; approval rests on your income and credit score.
That difference, collateral or not, drives the rate, eligibility, and risk.
Loan against FD vs personal loan: side by side
| Feature | Loan Against FD | Personal Loan |
|---|---|---|
| Type | Secured (against your FD) | Unsecured |
| Interest rate | Low: usually FD rate plus 1 to 2 percent | Higher (typically ~10 to 24 percent) |
| Credit score | Minimal or no check | Important |
| Loan amount | Up to ~90 to 95 percent of FD value | Based on income and eligibility |
| Processing fees | Often minimal or zero | Usually 1 to 3 percent |
| FD status | Stays intact, keeps earning | Not applicable |
| Main risk | FD recovered if you default | Credit damage on default |
How a loan against FD works
You pledge your fixed deposit, and the bank lends you up to around 90 to 95 percent of its value (the Loan-to-Value ratio). Key features:
- Very low interest. Because your FD secures the loan, the rate is typically just 1 to 2 percent above your FD interest rate, far cheaper than a personal loan.
- Your FD keeps earning. The deposit stays intact and continues to earn its interest, so you are not losing out by breaking it.
- You pay interest only on what you use. Especially in the overdraft form, interest is charged only on the amount you actually draw, not the full limit.
- Minimal eligibility hurdles. Little or no credit score check is needed, since the FD is the security, making it accessible even with a weak or thin credit history.
The main risk: if you do not repay, the bank can recover the dues from your FD.
When to choose each
Choose a loan against FD if:
– You have a fixed deposit and want the lowest possible interest rate.
– You do not want to break your FD (and lose interest or pay a penalty).
– You have a weak or no credit history, since it needs minimal checks.
– You need funds quickly and cheaply for a short-term need.
Choose a personal loan if:
– You do not have an FD, or do not want to pledge it.
– You want to keep your FD completely free of any lien.
– You have a good credit profile that gets you a reasonable rate.
The smart takeaway
If you have an idle FD and a short-term need, a loan against FD is usually the cheaper, simpler option, and far better than breaking the FD (which costs you interest and possibly a penalty). Reserve a personal loan for when you have no FD to pledge, or want to keep your deposit untouched.
Frequently asked questions
Is a loan against FD cheaper than a personal loan?
Yes, usually. A loan against FD is secured, so its rate is typically just 1 to 2 percent above your FD rate, much lower than an unsecured personal loan.
How much can I borrow against my FD?
Typically up to around 90 to 95 percent of your fixed deposit’s value, depending on the bank. The rest acts as a margin protecting the lender.
Does my FD keep earning interest if I take a loan against it?
Yes. Your fixed deposit stays intact and continues to earn its interest, while you pay interest only on the amount you borrow. That is a key advantage over breaking the FD.
Do I need a good credit score for a loan against FD?
Usually not. Because your FD secures the loan, little or no credit check is required, making it accessible even with a weak or no credit history.
What happens if I do not repay a loan against FD?
The bank can recover the outstanding amount from your pledged fixed deposit. So borrow only what you can repay, to keep your FD safe.
Need funds without breaking your FD? Check your eligibility and a personalised rate for a Jupiter Personal Loan in a few taps — no collateral required.
Borrow the smart way
Whether you borrow against an FD or take a personal loan, the goal is the cheapest option for your situation. In the Jupiter app, you can check your eligibility for a personal loan and see the rate, amount, and EMI upfront, and book fixed deposits through partner banks too. Jupiter is the 1-app for everything money.
Interest rates, LTV ratios, and eligibility vary by lender and are subject to change. Deposits and loans on Jupiter are offered through RBI-regulated partner banks and NBFCs. This article is general information, not financial advice. Please borrow responsibly.
