Liquidating your Fixed Deposit (FD) when you are in need of money is not a profitable decision because if you do so, you lose out on the interest and also end up paying a penalty amount. Once the FD is liquidated, the bank pays interest at a rate that is lower among the rates at which the FD was approved and the rate of interest on the day of liquidation.To save yourself from these financial hassles and fulfill your emergency cash needs, State Bank of India provides the facility to avail a loan against your FD. This is a good option as it ensures that the benefits you derive from the Fixed Deposit account stay intact, and offers the loan at a comparatively lower rate of interest.Another benefit of the overdraft against fixed deposits is that the borrower keeps on earning interest on his existing fixed deposit scheme even if the loan has been sanctioned by the bank. This interest can be used for the prepayment of the loan as the bank also does not levy any foreclosure charges in case the loan is repaid before the tenure of the overdraft ends.Single or joint account holders holding Fixed Deposits are eligible to avail this loan. Single account holders can also get overdraft facility through net banking against their TDR and STDR. In case of joint holders, each and every member has to approve the loan request before the application is processed by the bank. In case the request application is not signed by even one of the members, the bank can disapprove the application and loan would not be sanctioned.
A fixed deposit is a financial product offered by banks to help you earn higher rate of interest on your savings than a regular savings account. It is a kind of savings account that pay you a fixed rate of interest on your savings for investing them for a stipulated duration decided by bank. As the name suggest, these are deposits for fixed tenures. You cannot withdraw them prior to maturity. But with advanced notification to bank and paying a penalty fee, you can withdraw your fixed deposits. You can invest in fixed deposits for varying tenures at different interest rates, and earn added benefits on your savings.