Fixed Deposit is a secure option for investment. Many people get FD done for investment but when they suddenly need money, they break the Fixed Deposit (FD) before maturity. Due to this, they also have to face loss. In fact, if you break FD before maturity, you get less interest and also have to pay a penalty. In such a situation, it is advised that it is better to take an FD loan than breaking FD. Let us discuss that in an emergency which is the best option between breaking FD or taking FD loan?
Interest rate when FD is broken before maturity
The interest rate reduces if the FD is broken before maturity. According to the website of the State Bank of India (SBI), the interest rate reduces by 1 per cent on breaking the FD.
For example, if 6 per cent interest is being given on FD and the investor breaks the FD in 6 months, then he will get interest at 5 per cent. Apart from this, he will also have to pay a penalty.
How much is the penalty?
The penalty rate of all banks is different. According to SBI rules, a penalty of 0.50 per cent is charged on FDs up to Rs 5 lakh. On the other hand, this penalty becomes 1 per cent on FDs up to Rs 1 crore. After deducting the penalty and interest, the bank gives the remaining amount to the investor.
How much interest is charged on an FD loan?
It is better to take an FD loan than breaking the FD. Investors can take a loan of up to 90 per cent of the total amount of the FD. For Example, if you have made an FD of Rs 1 lakh, then you can take a loan of up to Rs 90,000.
You will have to pay 1 to 2 per cent more interest on this loan than the interest rate on FD. That is, if 4 per cent interest is being received on FD, then the investor has to pay 5 to 6 per cent interest on the loan.
If the investor does not repay the loan amount, then when the FD matures, the bank deducts the loan amount. The amount that remains after deducting the loan amount is credited to the investor's account.
Why FD loan is a good option?
It is better to take a loan at a time of need rather than breaking FD. However, if you need less money then taking a loan will be beneficial for you. However, if you need more money then breaking FD is a good option.
For example, if you take a loan of Rs 50,000 on an FD of Rs 1 lakh, then it is a good option because in this you will be able to fulfil your needs and your savings will also be saved.
However, if you need Rs 80,000 or Rs 90,000 then you should break the FD.
