Loan against recurring deposit is a very popular product and provides a number of benefits both to the lender as well as the borrower.
Recurring deposit is a scheme by which one can save a fixed amount of money every month and helps in inculcating savings habit among all. The amount and tenure is fixed during availing the product and the rate of interest is locked meaning that irrespective of the changes in interest rate during the tenure of the deposit, the interest rate will remain the same
Loan against Recurring Deposit – Benefits for the borrower
- The borrower need not prematurely close the deposit account before maturity
- The loan amount can be as high as 90% of the amount thus deposited
- The rate of interest of loan is very low, generally 1% more than the interest he is earning on RD. If the bank is paying him 9% on the deposit, he may be asked to pay only 10% on the loan amount
- There is flexibility in repayment
- Negligible paperwork involved
Loan against Recurring Deposit – Benefits for the lender
- The loan is fully secured
- The lender need not part with the deposit amount
- The product helps to generate more business for the Bank.