Smart things to know: Loans against fixed deposits
Investors can raise funds against FDs without having to break these by taking an overdraft. So the FD continues to earn interest for the investor.
Investors can raise funds against FDs without having to break these by taking an overdraft. So the FD continues to earn interest for the investor.
The interest is payable only to the extent that the facility is used and for the period it is used, not for the entire sanctioned limit.
Some banks also offer loans against third-party deposits held with other banks. A lien is marked on the deposit when an overdraft facility is taken.
Banks may specify a minimum and maximum overdraft amount. The maximum amount is usually a percentage of the fixed deposit.
The overdraft facility is usually available at rates slightly higher than those earned on the fixed deposit. Since it is secured by the deposit, the rates are reasonable.
The overdraft against FDs can be foreclosed without attracting a penal charge. Also, there is no fixed tenure for the repayment of the loan.
(The content is courtesy Centre for Investment Education and Learning (CIEL))
The interest is payable only to the extent that the facility is used and for the period it is used, not for the entire sanctioned limit.
Some banks also offer loans against third-party deposits held with other banks. A lien is marked on the deposit when an overdraft facility is taken.
Banks may specify a minimum and maximum overdraft amount. The maximum amount is usually a percentage of the fixed deposit.
The overdraft facility is usually available at rates slightly higher than those earned on the fixed deposit. Since it is secured by the deposit, the rates are reasonable.
The overdraft against FDs can be foreclosed without attracting a penal charge. Also, there is no fixed tenure for the repayment of the loan.
(The content is courtesy Centre for Investment Education and Learning (CIEL))
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