How Loan against Fixed Deposit differs from Personal Loan?

Prematurely breaking the FD to use money is a bad idea as your interest income is also gone! Instead, you can take a loan against FD! Read on to know more!

Mr. Prem Chaudhari, a resident of Kanpur, was once a happy man. He had two children, and one of them was to get married in a month’s time. However, just 15 days before the marriage when the family went to Lucknow to do shopping for the wedding, an unfortunate incident of robbery happened.

Some people barged into the house from the terrace and looted the money and jewelry worth Rs.3 lakh. Because of the incident, a vibrant feeling of joy and happiness converted into sadness. He needed around Rs.3 lakh to pay for wedding costs immediately.

He has invested in a Fixed Deposit Scheme of a leading online non-banking finance company (NBFC) for an amount of Rs.5 lakh. However, that amount was saved for the wedding expenses of his other child. Should he break the fixed deposit? Or, was there any other method to cover his needs of such a huge amount of money? This worried him a lot, and he had no option but consult his finance expert to get a solution.

The finance expert suggested him not breaking is fixed deposit because by doing so, he would also have to let go of the hefty interest payments received at a tenor completion. Thus, it was decided that breaking the fixed deposit prematurely was not a wise decision.

Prem Chaudhari thought of availing a personal loan to cover his needs, but since for that he would have to cough up around 12% as the rate of interest, it was ruled out. His finance manager finally advised him to avail the facility of applying for a loan against the fixed deposit amount.

Since he needed around 3 lakh and his FD investment was for Rs.5 lakh, he was eligible to get a 90% loan against it. They calculated and found that he could get a loan of up to Rs.4,50,000. He applied online for a loan of Rs.3,25,000 quickly which was approved soon, and relived a sigh of relief as the wedding went off without issues.

If you have invested in any of the fixed deposit schemes, you should know that you are eligible for a loan at a lower rate of interest. Let’s know more now!

What is a loan against fixed deposit?

Many leading banks and other financial institutions allow an FD investor to avail a short-term loan against your FD without breaking it prematurely and lose the interest payment.

You are allowed to avail a loan up to 90% of the fixed amount which is considered a security. In case if you fail to repay the loan in time, lenders may utilize the FD’s money to recover the loss.

The good news for availing a loan against FD is that you only need to pay 1-2% higher interest rate for it than your FD interest rate. What’s more, there are also no prepayment charges on such a loan. Nevertheless, you may have to pay a negligible processing fee to your lender to facilitate the same.

Thus, when compared to a conventional personal loan with a higher rate of interest along with other costs, a loan against FD is more economical and easy to afford!

The Bottom Line

Don’t be stuck with other costly money alternatives when you can easily make the most of the facility that’s available inside your feature-rich fixed deposits. Yes, should you have an urgent need for money, you would ask for a loan against the FD super-easy!

Eligibility Criteria to Take a Home Loan in Mumbai

Mumbai is the biggest metropolitan city in Maharashtra. It is famous as the entertainment and financial capital of India. It is one of the largest cities in India and dearly called the city of dreams.

But, if you have a dream to own a house in Mumbai, it can be a financial burden for you. You can take a Home Loan in Mumbai to fulfill your dream of a home. The Home Loan takes care of all your needs for your home and offers them in a drafted package.

Eligibility criteria for taking a Home Loan in Mumbai

For taking House Loans in India, you must be eligible for it. So, check the general eligibility criteria below:

  • Citizenship

For acquiring a Home Loan, you must be a resident of India.

  • Age

You should be of an age of 25 years to 58 years.

  • Experience

You should be a salaried person with more than 3 years of work experience.

If you have qualified the eligibility criteria for taking a housing loan in Mumbai, you must know what you need to do further.

You should know the required Home Loan documents that will be needed to take the loan. Prepare all the necessary documents and keep them up to date to submit when asked.

Documents required for a Home Loan in Mumbai

Following documents will be required to take the Home Loan:

  • A complete filled application form
  • Your KYC documents
  • Your photographs
  • Your identity proof
  • Your address proof
  • Your income details that include form 16, your latest salary slips and ITR document
  • Your bank account statement of past 6 months

How to get the best Home Loan interest rate in Mumbai?

Getting the best Home Loan interest rates in Mumbai is not as difficult as it seems.Few of the leading lenders not only offers the lowest housing loan interest rates in Mumbai but also helps you get instant approval with nominal fees.

To get the best Housing Loan interest rate you can do the following things.

  • Survey the market

Keep noticing the trends of the RBI’s repo rate change, government policies, fluctuating demand of homes, and various economic factors. This will give you an idea when you can get a better and lower Home Loan interest rate.

  • Negotiate

If you are an existing customer of the lender’s firm, you have all the freedom to negotiate with your lender. Lenders may offer the most beneficial alternative and provide you a better interest rate. You can use various Home Loan calculator available at the lender’s website, to get an estimate of the interest rate and other charges that you will be paying.

  • Choose the right lender

When opting for a Home Loan, choose a lender whose rates are based on MCLR (marginal cost of funds based lending rate) rather than a base rate to offer you the lowest interest on the loan. By doing this, you can avoid the chances of paying higher interest by the end of the tenor or any extra charges.

  • Go over the credit score

To get the best Home Loan rates, you should try to maintain your credit score. You must take care of the bill payment due date of your credit card as it may affect your credit score. You must also repay EMIs on time for an existing loan, as it will help you in maintaining a good credit score.

The Bottom Line

Now, as you know that you are eligible for taking a loan, go ahead and apply for a Home Loan in Mumbai to fulfill your dream of a home.

Happy Housing Loan application!

 

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