The reason for the growing popularity of this option as against traditional unsecured personal loans is the host of added benefits that come with such a loan.
- The interest rates available for personal loans against fixed deposits are lesser than conventional personal loans. The rates for such loans are generally 1 to 2% higher than the rates being paid by the bank for the fixed deposit.
- Such a loan does not require one to liquidate the FD which in that case lesser interest for being broken midway. This way the asset remains while the immediate financial requirements are met.
- The tenure for the personal loans against fixed deposits normally extends up to the maturity of the fixed deposits.
- The processing is also hassle free as the bank where you already have the fixed deposit will itself provide the personal loan against it.
- There is no prepayment penalties associated with these kinds of loans which gives the borrower the freedom to repay whenever his cash flow situation improves.