Bank FD Vs Personal Loan: In today’s times when financial needs may arise suddenly, taking a loan has become a common thing. There are many types of loan options available in the market. Of these, there are two main options – loan against fixed deposit (FD) and personal loan. Both have their own merits and demerits. Let us know which option can be more beneficial for you.

If you have made a fixed deposit in the bank, then you can take a loan against that FD. It is called secured loan, because in this your FD is mortgaged.

What are the benefits of secured loan?

Banks or NBFCs can give loan up to about 80-90% of your FD amount.
The special thing is that despite taking a loan, you keep getting interest on your FD.
The interest rate on such loans is usually only 1-2% higher than the interest on FD.
The loan processing time is very short as the bank already has your financial information.

Example:
If your FD is getting 6% annual interest, then the loan taken on it can be available at 7-8% interest rate. This is much cheaper than any unsecured loan.

Personal Loan: Loan without guarantee

Personal loan comes in the category of unsecured loan, that is, for this you do not need to mortgage any property. This is useful for those who do not have any guarantee like FD.

Main Features:

Personal loan interest rates can range from 10% to 24%.
The interest rate mainly depends on your credit history, income and profile.
Its processing may take time and documentation is also more.
Payment has to be made in the form of fixed EMI, and there is a penalty for not paying on time.

Special benefits of loan against FD

Flexibility: You can pay in installments or in lump sum.
Credit score safe: If payment is not made on time, the bank deducts the amount from the FD, due to which your credit score is not affected.
Interest Benefits: Interest continues to be received on FD.

Which is the right option for you?

It is better if you have an FD: If you already have an FD, then taking a loan against it would be a wiser step. This is a fast, easy and low interest option.
If you don’t have FD then personal loan is right: If you do not have any collateral asset, then personal loan may be the only option, although a strong credit score is necessary for this.

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