If the loan against your FD is not paid, then the bank can foreclose your fixed deposit to recover the loan. You will lose the FD amount along with the interest income. 

Advantages of a Loan Against FD

  • A loan against FD has lower interest rates compared to other loan options.
  • You do not have to pay any processing charges or other taxes that may get levied on other loan options.
  • By opting for a loan against FD, you are not losing any money from your FD.

Disadvantages of a Loan Against FD

  • Defaulting on your loan against a fixed deposit will lead to foreclosure of the deposit for loan recovery. Hence, you may lose out on the entire fixed deposit  investment along with the interest income. 
  • The tenure of the loan against fixed deposit cannot be longer than your fixed deposit. 
  • If you cannot pay your loan against fixed deposit in the remaining days of the loan tenure, then it will be better to break the FD.