YOUR REQUESTS: You can take out a personal loan from a bank against your term deposits

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Financial institutions will check credibility with CIBIL, Equifax, or Experian, before sanctioning the loan.

By Chaitali Dutta

I have deposits worth Rs 20 lakh in banks. Can I pledge FD and get a loan at a lower rate from a bank?
Yes, a loan against FD can be obtained from the same bank without premature withdrawal. Your deposit continues to grow at the pre-set rate without hindrance. You pay interest a few basis points higher than the FD rate, for the period for which you benefit from the loan. If you do not repay the loan, at maturity, the proceeds from the FD will first be used to close the loan and the balance amount will be transferred to you.

About 50% of my fixed income investments are parked in my overdraft account for my home loan in SBI. It earns 7.7% interest (save that amount on my loan). Should I keep it here or move it to another instrument or repay the loan?
– Satish Nair
This is great management of your cash flow, interest payments, and asset allocation and rebalancing. If your cash flow allows you to deal with IMEs, continue with the status quo. You can consider liquidating the loan only when it is necessary to obtain a free loan.

I am considering taking out an additional home renovation loan linked to my existing home loan account. Will I get a tax benefit on the loan and will the bank charge a prepayment charge?
– Rajiv Anand
For the tax advantages under 80C and 24B, the mortgage loan and the complementary loan will be considered as a single entity. Regarding the prepayment charge, refer to the sanction letter and check the fine print for terms and conditions. For a variable rate loan, there are no prepayment charges but a fixed rate loan will have them.

A few years ago, I defaulted on a car loan. I plan to take out a home loan from the same bank, but she refuses. Should I try other banks without disclosing the default?
—Suman Nath
The default is reported by each FI and is factored into the borrower’s credit rating. Have your score corrected at the same bank where you defaulted, provided you have now refunded all contributions. Otherwise, pay the dues first before looking for another loan. Financial institutions will check credibility with CIBIL, Equifax, or Experian, before sanctioning the loan.

The author is the founder of AZUKE Personal Finance Advisory (www.azukefinance.com). Send your questions to [email protected]

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