Consider having access to funds whenever needed without worrying about liquidity limits or financial instability. In today's unpredictable financial world, having untimely access to funds can be a game-changer. Whether you are a business owner, an entrepreneur, or an individual, unexpected expenses and financial emergencies can arise at any moment. This is where a 24x7 overdraft against Fixed Deposit comes in - providing you with a safety net and peace of mind.

This article will provide a detailed overview of overdrafts against fixed deposits, their benefits, overdraft limits against FD, and more. So, let’s get started!

Understanding The Basics of An Overdraft Facility

An overdraft facility is a credit line that allows a person or business to withdraw money from their bank account even when the balance is zero. This can be useful for managing cash flow issues in the short term. An overdraft facility is similar to a loan, but the interest is charged only on the amount used, not the entire loan approved. 

Overdraft against Fixed Deposit

An overdraft against a fixed deposit (FD) is a way to borrow money from a bank using the FD as collateral. The FD account holder receives a line of credit that allows them to withdraw funds up to the overdraft limit. Banks typically allow overdrafts of up to 90% of the FD value, and interest rates are usually 1–2% higher than the FD rate. For example, if the FD earns 6% annually, the overdraft will earn 7–8% annually. 

Benefits of 24x7 Overdraft Against FD

These are the benefits of 24x7 overdraft against FD:

Accessible & flexible 

As the name suggests, it is available 24x7, making it accessible for individuals who require quick and instant funds. The individuals can repay the amount without incurring penalties. It offers financial freedom and reduces the financial burden. 

Higher loan amount

Individuals can usually borrow up to 90% of the total value of their fixed deposit when taking out a loan against it. For example, if you have an INR 8 lakh fixed deposit, you can borrow up to INR 7 lakh against it. It allows you to utilise a considerable chunk of the value of your fixed deposit without having to liquidate it entirely.

Competitive interest rate

One of the most notable advantages of a loan against a fixed deposit is that the interest rates are lower than other types of loans. As a secured loan, the interest rate on loan against an FD usually is just 2% to 3% more than the fixed deposit interest rate. If you earn 8% interest on your fixed deposit, you will have to pay 10% to 11% interest on the loan against it. It allows you to recover a considerable percentage of the interest payment by earning income on the fixed deposit.

Flexible repayment

When taking out a loan against a fixed deposit, you can choose a repayment period equal to the fixed deposit's lifetime. However, it is vital to note that the loan period may be lower than the FD tenure but cannot surpass it. For example, if the fixed deposit period is seven years, the loan duration may be less than or equal to seven years but not longer.

How to apply for a 24x7 overdraft against FD

To apply for an overdraft against FD, you may follow these steps:

• Visit your bank’s website

• Log in to your internet banking using CRN / Login ID & password

• Head over to the Fixed Deposit section and select overdraft against FD

• Click on Apply now

• Enter the required information and select the loan amount, tenure, etc

• Once approved, you will receive a text or email with the registered credentials.

You may also apply for the same offline – by visiting the bank and submitting an application. 

Eligibility criteria for 24x7 overdraft against FD

These users are eligible for 24x7 overdraft against FD

• Indian resident

• Must be 18 years and above

• Corporations

• Business

• Trusts

• Societies

• Clubs

• Hindu Undivided Families (HUFs)

• Academic institutions

• Organisations

Conclusion

Banks typically allow overdraft limits against FD of up to 90% of the existing fixed deposit (FD) value. The interest on the overdraft (OD) facility is usually 1–2% higher than the interest on the FD. The tenor of the OD is determined by the maturity time of the loan. When the FD is renewed, the bank also allows the OD facility to be renewed. If you need a short-term loan that you can repay quickly, an OD on FDs may benefit you.