Monday, 28 May 2018

Everything You Need to Know About FD Overdraft


So, you need some money. As simple as that. What can you do? Take a loan. Why not take an overdraft against your Fixed Deposit (FD). Yes! The good old FD will come as a saviour in times of a financial crisis. All term deposit holders are eligible to take a personal loan using their term deposit as a collateral. A loan can thus be availed without any hassle for up to 90% of the deposit amount. 

What are the benefits of taking a loan/overdraft against a term deposit?

Easy and hassle-free: When it comes to availing credit against your own time deposit, the whole process becomes more simple. It is quite simple to apply for this facility and some banks even offer the facility to do it online. All customers have to do is to submit the documentation.

Less time consuming for approval: Compared to the time and effort taken to apply for a traditional loan, the process involved in taking a loan/overdraft is much more speedier. The loan approval process is pretty fast and there is no long wait involved. In most cases, this loan will be granted in less than 24 hours

Lesser interest rate: Probably one of the advantages of this facility is that the rate at which the loan is granted is much lesser that what is offered to other loans. For instance, if you are getting paid around 6.00% per annum on the term deposit, you will have to pay an additional 1% to 2% interest rate for the loan. This is much lesser when compared to other loans, for which the rates range from 16% to 24% per annum.

No need to break FD: The best part about this type of loan is that there is practically no need to close or break the term deposit that you hold. The deposit holder will be able to take a loan and also earn interest on the deposit at the same time. This is one of the advantages that customers can gain from holding a time deposit and taking a loan on it as well.

With a lot of technological developments that are taking place, overdraft can now be taken even by applying online. For example, those who hold a State Bank of India (SBI) FD, can avail a loan/overdraft through the SBI YONO app. In this case, the customer does not have to go to the bank branch physically and can go and loan/overdraft will be granted online at the click of a button. Here are some important things to know about the SBI overdraft facility:

  • All those who have what is called a single account will be able to take a loan or an overdraft through the YONO app
  • As of now, those who hold a joint account with bank will not be able to avail this particular facility
  • The minimum loan amount that will be granted is Rs.25,000, while the maximum is Rs.5 crore
  • Only an interest rate of 1% more will be charged for taking a loan this route
  • As of now, there are no processing charges involved in this type of loan facility that is granted by the SBI
  • Those who are taking this loan can get up to 90% of the deposit amount as a loan

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