Take a loan against your FD, or break it? Find out which is cheaper.
A loan against your own fixed deposit is one of the very cheapest ways to borrow, at just your own FD rate plus a small margin, and your deposit keeps earning all the while. This calculator shows you your maximum loan, its true cost, and whether borrowing beats simply breaking the FD and paying the penalty, so you make the cheaper choice with confidence.
Borrowing cost against a pledged deposit versus premature withdrawal
Why Borrow Against Your FD Instead of Breaking It
In short: A loan against your fixed deposit lets you pledge the FD as collateral and borrow up to 85 to 95 percent of its value, without closing the deposit. The interest rate is just your FD rate plus a small bank margin of 1 to 2 percent, making it one of the cheapest loans available.
Your FD keeps earning throughout, so you avoid the penalty and lost interest of breaking it early. But it is not always the better choice than simply breaking the deposit, and this calculator shows you exactly when each route wins.
The appeal is simple. Because you are borrowing against your own money, the bank’s risk is almost nil, so the cost is low and approval is quick, often the same day. You keep your FD intact and earning, which matters if it carries an attractive rate you would not get again, and you avoid the premature withdrawal penalty most banks charge for closing a deposit early.
Yet the common assumption that a loan is always cheaper than breaking the FD is wrong. If your FD is close to maturity, or the penalty for breaking it is small, simply withdrawing the money can cost less than paying loan interest for the period you need it. The right answer depends on the numbers, and running them is the only way to be sure.
This is the single most useful thing this calculator does. Most online tools simply compute the loan cost and stop, leaving you to assume the loan is the right move. By putting the loan cost next to the true cost of breaking the FD, the decision becomes clear rather than an assumption, and in a meaningful share of cases the answer surprises people.
The calculator above settles this. It works out your maximum eligible loan from the FD value and the loan-to-value ratio, computes the loan’s interest cost at your FD rate plus the margin, and compares that against the cost of breaking the FD, the penalty plus the interest you would forgo. It then tells you which route is cheaper and by how much.
The overdraft advantage
Most banks offer the facility as either a term loan or an overdraft, and the difference matters for cost. A term loan charges interest on the full sanctioned amount for the whole period. An overdraft charges interest only on the amount you actually draw, whenever you draw it.
So if you need funds intermittently, or you are not sure you will use the whole limit, an overdraft can save you a great deal. You get access to the full eligible amount but pay only for what you use, which makes the overdraft the more economical choice for most flexible borrowing needs.
The term loan still has its place. If you need the whole amount at once for a single, defined purpose and will repay it over a set period, a term loan is straightforward and its equated instalments make budgeting simple. The choice between the two comes down to whether your need is a single lump sum or a fluctuating requirement, and the calculator lets you see the cost implication of each.
Under the hoodHow This Loan Against FD Calculator Works
The tool applies the standard loan-against-FD rules and then makes the comparison that actually decides the matter. Understanding each step lets you check the figures and plan.
Step one: eligibility and the loan cost
The calculator multiplies your FD amount by the loan-to-value ratio to find the maximum you can borrow. It sets the loan rate as your FD rate plus the bank margin you entered, since that is how these loans are priced.
It then computes the interest cost on the amount you actually need, over the months you need it. Because the loan is against your own deposit, your FD continues to earn its full interest, so the only cost of borrowing is the loan interest itself.
Step two: the break-the-FD comparison
Next, the calculator works out what breaking the FD would cost instead. This has two parts: the interest you would forgo by withdrawing the money rather than leaving it to earn, and the premature withdrawal penalty the bank applies for closing the deposit early.
It adds these to get the total cost of breaking, then compares it against the loan’s interest cost. The lower of the two is the cheaper route, and the tool reports it along with the saving, so you can see clearly whether to borrow or withdraw.
The margin is small but real. Because the loan rate is only 1 to 2 percent above your FD rate, the extra cost of borrowing over that period is modest. But over a long tenure it adds up, and if your FD is near maturity, breaking it may cost less than paying that margin for years.
Loan Against FD Terms at a Glance
The figures below are typical across Indian banks. Actual terms vary by bank and deposit type, within the framework of the Reserve Bank of India. Confirm the exact terms with your bank.
| Feature | Typical range |
|---|---|
| Loan-to-value ratio | 85 to 95 percent of FD value |
| Interest rate | FD rate plus 1 to 2 percent margin |
| Facility type | Overdraft or demand loan |
| Loan tenure | Up to the FD’s remaining maturity |
| Senior citizens | Often up to 95 percent LTV |
| Processing | Fast, often same day, minimal paperwork |
Which FDs are not eligible
| FD type | Eligibility |
|---|---|
| Tax-saving FD (5-year lock-in) | Not eligible for a loan |
| FD in the name of a minor | Not eligible |
| NRE, NRO, FCNR deposits | Eligible, LTV varies |
| Regular and senior citizen FDs | Eligible |
Because a loan against FD is so cheap, it is worth knowing before you decide whether the FD itself was the right place for your money. To check what your deposit earns, use the fixed deposit calculator, and to weigh an unsecured alternative, the personal loan EMI calculator.
Getting itHow the Facility Works in Practice
A loan against FD is one of the simplest credit facilities to arrange, precisely because the collateral is already with the bank. Knowing the practical steps helps you decide quickly when a need arises.
The starting point is an eligible fixed deposit. Any regular or senior citizen FD you hold with the bank qualifies, as do NRE, NRO, and FCNR deposits for non-residents, but tax-saving FDs and deposits in a minor’s name do not. Because the bank already holds your deposit, there is little further verification needed.
Most banks now let you set up the loan or overdraft entirely online, through net banking or a mobile app, often in minutes. You select the deposit to pledge, choose the amount within the eligible limit, and the facility is activated. For an overdraft, the limit simply becomes available to draw on as needed.
Because the loan is fully secured by your own money, there is no credit assessment of the kind an unsecured loan involves, no income proof to submit, and no lengthy approval. This speed is a large part of the appeal: when an unexpected expense arises and you hold an FD, the facility can put funds in your hands the same day, at a rate barely above what the deposit itself earns.
The bigger choiceWhere a Loan Against FD Fits
A loan against FD is not the only way to raise money in a hurry, and understanding where it sits among the alternatives helps you choose the right one. Its defining traits are a very low rate, instant availability, and the fact that it uses money you already have set aside.
Against an unsecured personal loan, the loan against FD wins decisively on cost. A personal loan charges 12 percent or more because it is unsecured, while a loan against FD charges only your FD rate plus 1 to 2 percent. The personal loan risks no specific asset, but for anyone holding an eligible FD, the cost difference is so large that the FD-backed loan is almost always the better choice for a planned need.
Against a gold loan or a loan against securities, the comparison is closer, since all three are secured and relatively cheap. The right one depends on which asset you would rather pledge and which you value keeping intact. A loan against FD has the advantage that the pledged asset, your deposit, keeps earning a guaranteed return throughout, whereas gold or shares may or may not appreciate.
The one genuine alternative that is not a loan at all is simply breaking the FD. For a very short need where the penalty is trivial, or an FD about to mature anyway, withdrawing your own money avoids any borrowing cost. This is the comparison the calculator centres on, because it is the decision most fixed deposit holders actually face in practice, and the one where the intuitive answer turns out to be wrong most often.
The sensible way to use the facility is as a cheap, standing source of liquidity that lets your savings stay invested. Rather than keeping a large idle balance for emergencies, you can keep the money in an FD earning interest and set up an overdraft against it, drawing on the overdraft only if and when a need arises. That way your savings work for you continuously, and the credit line costs nothing until you use it.
This approach also removes a hidden cost that many people never notice. Money kept idle in a savings account for emergencies earns a low rate, far below what a fixed deposit pays, and that gap is a real cost of holding liquidity you rarely use.
By moving that money into an FD and backing it with an overdraft, you close the gap: the funds earn the higher FD rate continuously, and you still have instant access through the overdraft if an emergency comes. For a disciplined saver, this is one of the most efficient ways to hold an emergency fund.
Worked examplesThree Situations and the Right Call
Numbers make the decision concrete. Each scenario below shows a different balance between loan cost and the cost of breaking the FD. Read the one closest to yours, then run your own figures above.
Manish has a Rs 10 lakh FD at 9 percent with two years left, and he needs Rs 2 lakh for just six months. A loan at his FD rate plus a 2 percent margin, so 11 percent, costs about Rs 11,000 in interest for the six months.
Breaking the FD would mean losing the attractive 9 percent rate on the whole deposit and paying a penalty, a far larger hit than Rs 11,000. Because his need is short and his FD rate is valuable, taking the loan is clearly the cheaper and smarter choice. He keeps the FD earning and pays only a small interest cost for the brief period.
The maths is stark when you lay it out. Breaking the FD would forfeit the difference between the 9 percent contracted rate and the lower rate applicable for a shorter completed tenure, on the full Rs 10 lakh, plus the penalty.
That easily runs into tens of thousands of rupees. Against that, the Rs 11,000 loan interest is trivial, and Manish also retains the option value of keeping a good FD that he could not replace at the same rate today.
Sneha’s Rs 5 lakh FD matures in just two months, and she needs Rs 3 lakh now. Her premature withdrawal penalty is small, only around Rs 2,500, because the FD is almost at maturity and she has already earned most of its interest.
Taking a loan for a period that would run past the FD’s maturity is awkward and, over the time involved, may cost more in margin than the modest penalty. Here, simply breaking the FD, paying the small penalty, and using her own money can be the cheaper and simpler route. When the FD is near maturity and the penalty is low, breaking it often beats a loan.
The reason is that Sneha has already earned most of the FD’s interest over its term. The penalty on the small remaining portion is minor, and there is little future interest left to forgo.
A loan would still charge the margin over the FD rate for as long as she holds it, and if that period is comparable to or longer than the FD’s remaining life, the loan simply costs more than the modest penalty. Her situation is the clearest case for breaking rather than borrowing.
Rohit runs a small business with uneven cash flow. He sets up an overdraft against his Rs 8 lakh FD, giving him a Rs 7.2 lakh limit at 90 percent, but he draws on it only when a payment gap arises, repaying as soon as money comes in.
Because an overdraft charges interest only on the amount actually drawn and only for the days it is outstanding, his cost is a fraction of what a term loan on the full limit would be. The overdraft gives him a cheap, standing safety net that costs nothing when unused and very little when tapped briefly. For a fluctuating need, this flexibility is exactly what makes the FD-backed overdraft so efficient.
The contrast with a term loan is instructive. Had Rohit taken a term loan for the full Rs 7.2 lakh limit, he would pay interest on the entire amount for the whole tenure, even in the months he needed nothing.
With the overdraft, his interest tracks his actual usage, which for a business with occasional gaps might be only a fraction of the limit at any time. Over a year, the saving from paying only for what he draws can be substantial, turning a standby facility into a very cheap one.
Reading the True Cost of Each Route
To compare a loan against your FD with breaking the deposit fairly, you have to look past the headline rates to the real, after-everything cost of each. This is where many people go wrong, and where a careful comparison saves money.
Consider the loan first. Its cost is the interest you pay, at the FD rate plus the margin, for the period you borrow.
Crucially, your FD keeps earning its full rate throughout, so there is no lost deposit income; the only cost is the loan interest. The net cost of the loan is therefore simply that interest, which for a short period at a small margin is often modest.
Now consider breaking the FD. Here the cost has two parts that are easy to underestimate.
First, the premature withdrawal penalty, which typically reduces the interest rate you earn on the deposit by 0.5 to 1 percent, or is charged as a direct penalty. Second, and often larger, the interest you forgo by taking the money out early rather than letting it run to maturity at the agreed rate.
The after-tax angle sharpens the picture further. FD interest is taxable, so for someone in a high tax bracket the real return on the FD is lower than the headline rate, which changes the comparison.
There is no tax benefit on the interest paid for a loan against FD, so the comparison is between the after-tax FD return you protect by not breaking, and the loan interest you pay. Running these true costs, rather than the headline rates, is what the calculator does, and it is the only reliable way to choose.
The practical rule that emerges is about time and penalty. When your FD has a long way to run and carries a rate you value, protecting it with a cheap loan usually wins.
When the FD is near maturity and the penalty is small, the loan’s margin over the remaining period can exceed the cost of simply withdrawing, so breaking wins. The tipping point is different for every case, which is why running your own numbers matters more than any rule of thumb.
It helps to think about the loan margin in rupee terms rather than as a percentage. A 2 percent margin on a Rs 2 lakh loan is Rs 4,000 a year, which sounds small, and for a six-month need it is only Rs 2,000. Set against the tens of thousands you might lose by breaking a high-rate FD early, that margin is clearly worth paying.
But flip the situation. If the FD is nearly mature and you would forfeit only a small penalty and a little remaining interest by breaking it, that same margin, paid over the months you hold the loan, can exceed the break cost.
The margin has not changed; what changes the answer is how much you stand to lose by breaking, which shrinks as the FD approaches maturity. Seeing both numbers side by side is what makes the trade-off obvious.
Expert tipsSix Tips for a Loan Against Your FD
Run the break-versus-loan numbers
Do not assume the loan is always cheaper. If your FD is near maturity and the penalty is low, breaking it can cost less. Compare both before deciding.
Choose an overdraft for flexible needs
If you do not need the full amount at once, an overdraft charges interest only on what you draw. For an uneven or standby need, it costs far less than a term loan.
Borrow only what you need
Just because you can access 90 percent of the FD does not mean you should. Borrowing only the amount you genuinely need keeps the interest cost down.
Watch the FD maturity date
Your loan tenure cannot cross the FD’s maturity. Set a reminder to renew or repay before the FD matures, or the bank will adjust the deposit against the loan.
Remember tax-saver FDs do not qualify
A five-year tax-saving FD and an FD in a minor’s name cannot be used for a loan. Check your deposit type before counting on the facility.
Compare against the after-tax FD return
FD interest is taxable, so your real return is lower than the headline rate. Weigh the loan cost against the after-tax return you protect by not breaking the FD.
Loan Against FD at a Glance
| Question | Answer |
|---|---|
| What you can borrow | 85 to 95 percent of FD value |
| Interest rate | FD rate plus 1 to 2 percent |
| Facility | Overdraft or demand loan |
| Overdraft interest | Only on the amount drawn |
| Tenure | Up to FD maturity |
| Tax-saver FD | Not eligible |
| Minor’s FD | Not eligible |
| Senior citizen LTV | Often up to 95 percent |
| FD while loan is on | Keeps earning, cannot be closed |
Frequently Asked Questions
What is a loan against fixed deposit?
A loan against fixed deposit is a secured loan where you pledge your FD as collateral and borrow against it, without closing the deposit. Banks lend up to 85 to 95 percent of the FD value, and because the loan is secured by your own money, the interest rate is very low, just your FD rate plus a margin of 1 to 2 percent. The FD continues to earn interest throughout the loan, so you keep your investment intact while accessing funds. It is available as an overdraft or a demand loan and is usually processed quickly with minimal paperwork.
How much can I borrow against my FD?
Most banks lend up to 90 percent of the FD value, and some offer up to 95 percent, particularly for senior citizens whose deposits carry a lower risk profile. So an FD worth Rs 10 lakh at 90 percent lets you borrow up to Rs 9 lakh. The remaining margin protects the bank against interest accumulating on the loan. The exact percentage depends on the bank and the type of deposit, with NRE, NRO, and FCNR deposits sometimes carrying a different loan-to-value. The calculator applies the ratio you enter to show your maximum eligible loan.
What is the interest rate on a loan against FD?
The interest rate is your FD rate plus a small bank margin, typically 1 to 2 percent. So if your FD earns 7 percent, you pay 8 to 9 percent on the loan. SBI charges around 1 percent over the FD rate, while HDFC and ICICI often charge 2 percent. This makes a loan against FD one of the cheapest borrowing options in India, far below the rate on an unsecured personal loan. Because the loan is fully secured by your own deposit, the bank’s risk is minimal, which is why the margin is so small.
Should I take a loan against my FD or break it?
It depends on how much time is left on the FD and the penalty for breaking it. If the FD has a long way to run, carries a rate you value, and you need money for a short period, a loan is usually cheaper because you pay only a small margin while the FD keeps earning. If the FD is near maturity and the penalty is low, breaking it and using your own money can cost less than paying loan interest. The calculator compares both routes for your exact numbers and tells you which is cheaper.
What is the difference between an overdraft and a term loan against FD?
A term loan gives you the full sanctioned amount and charges interest on all of it for the whole tenure. An overdraft gives you a limit you can draw from as needed, and charges interest only on the amount you actually draw and only for the days it is outstanding. For a one-time need for the full amount, either works. But if your requirement is uneven or you may not use the whole limit, an overdraft is far cheaper, because an unused limit costs nothing. Most people with flexible needs are better off with the overdraft.
Can I take a loan against a tax-saving FD?
No. A five-year tax-saving fixed deposit, which offers a deduction under Section 80C, cannot be used as collateral for a loan, because its lock-in and premature withdrawal restrictions prevent it from serving as security. Similarly, an FD held in the name of a minor is not eligible. Regular FDs, senior citizen FDs, and NRE, NRO, and FCNR deposits are eligible, subject to the bank’s terms. So before counting on a loan against your deposit, check that it is not a tax-saver or a minor’s FD, as these are specifically excluded.
Does my FD keep earning interest during the loan?
Yes. This is the key advantage of a loan against FD over breaking the deposit. Your fixed deposit continues to earn its full interest at the agreed rate throughout the loan period, because it is only pledged as collateral, not withdrawn. So the net cost of borrowing is just the loan interest you pay, with no loss of deposit income. This is why, for an FD with an attractive rate and a long time to run, a loan almost always beats breaking it, since you protect the deposit’s earnings while accessing funds cheaply.
How is the loan repaid?
Repayment depends on the facility. A demand or term loan is usually repaid through equated instalments or as agreed with the bank over the tenure. An overdraft is more flexible: you repay whenever you have funds, and the interest is charged only on the outstanding balance for the days it is used. In all cases, the loan tenure cannot exceed the FD’s maturity date. If the loan is still outstanding when the FD matures, the bank will typically adjust the deposit against the loan, using your matured FD to clear the balance.
Is a loan against FD faster than a personal loan?
Usually, yes. Because your FD is the collateral and the bank already holds it, a loan against FD involves minimal verification and paperwork, and is often approved and disbursed the same day, sometimes instantly through net banking or a mobile app. A personal loan is unsecured, so it requires income verification, credit assessment, and more documentation, which takes longer. The loan against FD is also much cheaper, since it is secured. For anyone who holds an eligible FD, it is typically both the fastest and the cheapest way to raise funds.
Does a loan against FD affect my credit score?
A loan against FD is secured and generally has a limited impact on your credit score compared with unsecured borrowing, and some banks may not report an overdraft against FD to the credit bureaus in the same way. Because it is backed by your own deposit, the lender’s risk is low, and timely servicing keeps your record clean. However, defaulting could still have consequences, including the bank adjusting your FD against the dues. If building or protecting your credit score is a concern, a loan against FD is among the lower-risk ways to borrow.
Can NRIs take a loan against FD?
Yes. NRIs can take a loan or overdraft against their NRE, NRO, and FCNR fixed deposits at most banks, including SBI, HDFC, and ICICI. The loan-to-value is typically up to 90 percent for NRE and NRO deposits and a little lower for FCNR, and the loan is disbursed in Indian Rupees. The FD cannot be closed prematurely while the loan is outstanding, and repayment can be made through remittance, an existing NRO account, or by adjusting the FD at maturity. The interest margins are broadly similar to those on domestic FD loans.
What happens if the FD matures before I repay the loan?
Because the loan tenure cannot exceed the FD’s maturity, this should not normally happen if the loan is planned correctly. But if the FD matures while the loan is still outstanding, the bank will typically adjust the matured deposit against the loan, using the FD proceeds to clear the balance and returning any surplus to you. To avoid this, plan the loan to be repaid within the FD’s remaining term, and set a reminder to repay or renew before maturity. Keeping the loan comfortably within the FD’s tenure keeps the arrangement clean.
Is this calculator accurate for my exact case?
The calculator applies the standard loan-to-value, the FD-rate-plus-margin pricing, and a clear comparison against the cost of breaking the FD to give a close estimate. It simplifies some areas, such as the exact premature withdrawal penalty structure at your bank, the precise interest computation on an overdraft used intermittently, and the after-tax nuances specific to your tax bracket. Use it to understand which route is likely cheaper and by roughly how much, then confirm the exact terms with your bank before deciding, especially the penalty and the loan-to-value on your specific deposit type.
Is interest on a loan against FD only on what I use?
It depends on the facility type. With an overdraft against your FD, interest is charged only on the amount you actually draw and only for the days it is outstanding, so an unused limit costs nothing. With a term or demand loan, interest is charged on the full sanctioned amount for the tenure, whether or not you use all of it. This is why an overdraft is usually the more economical choice for a flexible or uncertain need, while a term loan suits a one-time requirement for a fixed amount.
Can I set up a loan against FD as an emergency line?
Yes, and it is one of the smartest uses of the facility. Rather than keeping a large idle balance in a savings account for emergencies, you can keep the money in a fixed deposit earning interest and set up an overdraft against it. The overdraft limit stays available whenever you need it, but costs nothing until you draw on it. So your savings keep working for you, and you have an instant, cheap credit line for genuine emergencies, drawing only what you need and repaying as soon as you can.
How does a loan against FD compare with a gold loan?
Both are secured and relatively cheap, but they differ in the pledged asset and the rate. A loan against FD is usually cheaper, at just your FD rate plus 1 to 2 percent, and the pledged deposit keeps earning a guaranteed return throughout. A gold loan pledges your gold, which earns nothing while pledged and whose value can move. If you hold an eligible FD, the loan against it is typically the cheaper and simpler option. A gold loan makes sense mainly when you do not have an FD to borrow against but do hold gold.
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Disclaimer and editorial transparency. This loan against FD calculator is an educational tool built to help depositors compare the cost of borrowing against a fixed deposit with the cost of breaking it, for FY 2025-26. The figures it produces are approximate and simplify several areas, including the exact premature withdrawal penalty structure at your bank, the precise interest computation on an overdraft used intermittently, the after-tax return specific to your tax bracket, and lender-specific variations in loan-to-value and margin.
It does not constitute financial or tax advice. Your actual terms depend on your bank, deposit type, and profile, and lending is subject to the framework of the Reserve Bank of India.
Verify all figures and terms with your bank before borrowing or breaking a deposit. CalcWise.Finance accepts no liability for decisions taken on the basis of this tool. Typical ranges reflect the market to the best of our knowledge and vary by bank, deposit type, and over time, so always confirm the current terms and the exact penalty structure directly with your own bank.