How to avail Loan on Recurring Deposit?
Those who earn a monthly income always rely on recurring deposits, if they feel the need to earn extra money. Depositing a smaller fixed sum for a year will gain them the relevant interest they need by the end of the year or on maturity. And what not, recurring deposits can also be kept as a guarantee and you can avail a loan on recurring deposit.
Why loans are granted against recurring deposits?
Some banks now offer you the freedom to avail a loan if you have opened a recurring deposit with them. Hence, if you are on the run to get a vehicle or home loan then this recurring deposit will be your guarantee against which the bank will provide you loan. The banks do not need further assurance than that, they know you well and know that you have been doing good business with them every month. You can avail a loan for up to 90% of the original value of recurring deposit amount from the bank. Loan against recurring deposits is arranged as demand loans or overdraft against deposits.
Benefits of availing loan against recurring deposits
- No processing fee for personal loans taken against recurring deposit
- Lower interest rate for personal loans taken against recurring deposit as they have your deposit amount as collateral in the bank.
- The recurring deposit will continue to gain interest even when loan is granted.
- No prepayment penalties
- Flexible repayment plan either as instalments or lumpsum or even upon maturity of recurring deposit
- Simple documentation only needed
- Easy availability of loan and processing time takes less than a day
- During a financial crisis, availing a personal loan against recurring deposit will get you money for a short term without causing any breach in your recurring deposit. It is the best solution rather than selling your assets for a very small margin.
- There is also an option to avail the cheque amount with cheque book, ATM card and internet banking.
- The loan against recurring deposit can be taken for any period of time but it should not exceed the time period of the recurring deposit.
- Some banks also offers overdraft facility against recurring deposit.
Who can avail the loan?
Only single account holders who have a recurring deposit in the bank can avail loan, joint account holders cannot avail loan for the same. Even third parties like corporate organizations that have an account with recurring deposit in it, can avail loan.
Limitations with loan availability for recurring deposit
- In case you fail to pay the loan amount, the bank can close your recurring deposit and recover its money.
- The loan will only be granted against recurring deposits which are free from lien or restrictions.
Recommended Read :
- What is Recurring Deposit?
- How Does Recurring Deposit Work?
- Guidelines and Minimum Amount to Open Recurring Deposit
- Millionare Fund Become a Millionare With Recurring Deposit
- Recurring Deposit a Good Regular Savings Habit in People
- Fixed Deposit Vs Recurring Deposit
- Why Banks Take Fixed Deposit?
- Best Alternatives to Fixed Deposits
- How to Avoid TDS on RD and FD?
- Tax Impact On Recurring Deposit Tax On Rd
- Premature Withdrawal of Recurring Deposit Closing Rd
- Loan On Recurring Deposit
- What is Term Deposit?