Advantages of Overdraft Against Fixed Deposit - ICICI Bank

Fixed Deposits (FDs) are a popular investment option in India due to their safety, assured returns and ease of investment. However, many people do not know that an FD can also serve as a financial backup during emergencies. You can opt for a loan or overdraft against an FD which allow you to meet urgent financial needs while keeping your FD intact.

An overdraft (OD) against FD is a secured credit facility where your Fixed Deposit acts as the collateral. This means you can access funds without closing or ‘breaking’ your FD and losing interest earnings. Let’s learn about this financial solution in detail in this blog post.

What is an Overdraft Against FD?

An OD against FD allows you to borrow funds up to a certain limit against your Fixed Deposit. You can withdraw as much money as you need from your Overdraft Account (up to the sanctioned limit). The key advantage of an overdraft is that you need to pay interest only on the amount you use (i.e., the amount you withdrew) and only for the period you use it.

ICICI Bank offers up to 90% of the FD value as an OD with lower interest rates than traditional loan options. You also get the benefit of quick approval, flexible repayment and continued interest earnings.

Benefits of OD Against FD

Here are some of the key advantages of this facility:

1. Lower Interest Rate

One of the biggest advantages of taking an overdraft against your FD is the lower interest rate compared to traditional loans. Since the overdraft is secured by your FD, the Bank offers a lower interest rate, making it a cost-effective option compared to unsecured loans.

2. Quick and Hassle-Free Loan Approval

Since your FD serves as collateral, there is minimal paperwork involved and the approval process is completed within a short time. This ensures that you get quick financial assistance without a long wait.

3. No Credit Score Requirement

An OD against FD does not depend on your creditworthiness. Since the FD acts as security, the Bank does not require your credit history or repayment track record. This makes it an excellent option for those with low or no credit scores who might otherwise struggle to get a loan. Additionally, taking and repaying the OD on time can help build or improve your credit score, making it easier to qualify for other types of credit in the future.

4. No Processing Fee or Prepayment Charges

Another benefit of an Overdraft Against FD is that the Bank does not charge processing fees for it, which reduces your borrowing costs. An OD against FD comes with zero or minimal fees. Additionally, if you wish to repay it before the tenure ends, ICICI Bank does not impose pre-payment charges.

5. Continued Interest Earnings on FD

Even after availing an OD against FD, your Fixed Deposit continues to earn interest. This means that while you use the OD amount to meet your expenses, your FD remains intact, helping you build wealth over time.

6. Flexible Tenure and Easy Repayment

ICICI Bank lets you take an OD against FD for up to 36 months, depending on the duration left of your FD. It also offers simple repayment options, making it easy to manage payments without ‘breaking’ your FD.

7. High Loan Amount Eligibility

ICICI Bank allows customers to borrow up to 90% of their FD amount as an overdraft (OD). This ensures that you can access a significant portion of your savings without closing the FD.

For example:

• If your FD amount is ₹ 2 lakh, you can get an OD of up to ₹ 1.8 lakh

• If your FD amount is ₹ 10 lakh, you can get an OD of up to ₹ 9 lakh.

This makes it an excellent option for urgent medical expenses, education fees, business funding or any personal financial requirement.

8. No Need to Close FD Prematurely

An FD offers assured returns but closing it before maturity can lead to penalty charges and a loss of earned interest. Instead of closing your FD early, opting for an OD against FD allows you to access money when needed while keeping your FD savings intact. 

Conclusion

An overdraft against your FD is one of the preferred ways to handle financial emergencies without disturbing your savings. It offers lower interest rates, quick processing, high loan amount and flexible repayment options. It does not require a credit score check and you also continue to earn interest on your FD. Instead of breaking your savings, consider this smart borrowing option to meet your financial needs while ensuring that your savings keep growing. 

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