Education loans against fixed deposits are one of the easiest ways to get a loan quickly because the fixed deposit acts as collateral. For a loan, collateral acts as a security that borrowers must pledge with banks to get the loan. The value of collateral should be equivalent to the amount of loan taken. In some cases, the value of collateral demanded by the bank is up to 125% of the loan and some banks demand only 50% value of the loan amount. Some common types of collaterals accepted for education loans are housing property, gold, mutual funds, and non-agricultural lands.
Education loans against fixed deposits are becoming popular among aspiring students. Such types of loans are called ‘Loans against Fixed Deposits’ (LADs) where banks accept FD as collateral security when providing education loans. Let’s check out the details in this blog.
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Can I get an Education Loan Against Fixed Deposits?
You can get an education loan against fixed deposits in India. Banks like SBI, ICICI, HDFC, and Axis Bank offer such education loans. Applicant’s fixed deposit acts as a security/ collateral. This means that the bank has a lower risk in lending you education loans because you have pledged your fixed deposits against the loan amount.
| Maximum Loan Amount | 70% to 90% of the loan amount |
| Interest Rates | Ranges from 7% to 10.05% p.a or 1% above the relative fixed deposit rate |
| Top Banks | SBI, Axis Bank, ICICI, and HDFC Bank |
| Documents Required | Duly filled application form and Fixed deposit certificate |
If in any case, you fail to repay the education loan, banks have complete rights to seize the fixed deposits. Since the loan is secured by your FD, interest rates on education loans against fixed deposits are typically lower than unsecured education loans. Check out the key features:
- Education loans against fixed deposits are similar to secured education loans that help applicants avail lower interest loans, quicker loan processing, and flexible repayment options.
- Unlike securities like apartments, houses, and gold loans for education, fixed deposits are pledged/ mortgaged with the banks to obtain education loans.
- The loan amount will be the partial percentage of your fixed deposit value. This percentage varies depending on the bank, but it often ranges from 75% to 90% of the FD amount.
Also Read: Interest rate increased on student loans? Check here for some major strategies to deal with education loans during high inflation.
Pros and Cons of Education Loan against FD
Although LADs offer benefits like lower interest rates, minimal processing fees, and prepayment flexibility, they also come with limitations. The loan term is tied to your FD’s maturity, and you risk losing access to the FD’s full value and potential earnings. Let’s see what are the advantages and disadvantages of taking education loans against fixed deposits-
Pros
- Lower interest rates: You are eligible for a lower interest rate on the loan compared to an unsecured loan. This is because the banks see your Fixed Deposits as a safety net to recover the loan amount in case of failure of loan repayment.
- Potentially lower fees: Existing customers of the bank get a reduced processing fee. Banks like SBI have no processing fee on education loans against FD.
- Early repayment with ease: There’s usually no penalty for paying off the loan early. This gives you more flexibility.
Cons
- Loan term tied to FD: The loan repayment period can’t be longer than the time your FD matures. This might limit your flexibility.
- Risk of losing FD access: If you can’t repay the loan, the bank can seize your FD.
- Limited loan amount: Unlike other secured education loans that offer 100% financing, education loans against FD can be availed only up to 90% of your FD’s value. This may not cover all your education costs.
- Reduced FD earnings: While the FD earns interest, you might not have full access to that money while repaying the loan.
Education Loans Against Fixed Deposits: Top Banks
Axis Bank, SBI, ICICI Bank, and HDFC Bank are some of the top banks offering education loans against fixed deposits. They offer you financial assistance without having to liquidate your fixed deposits. Check out the list of top banks offering education loans against FD:
| Top Banks | Loan Amount against FD |
| Axis Bank | Up to 85% of the FD amount |
| State Bank of India | Up to 90% of the FD amount |
| ICICI Bank | Up to 90% of the FD amount |
| HDFC Bank | 70% to 90% of the FD amount |
Axis Bank
Axis Bank allows applicants to avail up to 85% of the value of the fixed deposits for education loans. The condition is that the loan can be availed against Axis Bank fixed deposits only and the minimum loan amount must be INR 25,000.
- Axis Bank education loan against fixed deposit interest rates range from 7% to 10.05%.
- You will be charged interest only on the actual amount utilized and for the tenure of utilisation.
- Applicants can avail of an overdraft facility with the chequebook, debit card, or ATM card and Internet banking facilities.
- There are no prepayment charges.
- Documents required are a duly filled application form and fixed deposit receipts duly discharged in favour of Axis Bank.
- There is no specific loan tenure and the applicants have the flexibility to repay the loan during that period.
- The applicant cannot prematurely close the bank FD unless the education loan against fixed deposits is repaid in full.
State Bank of India
Applicants can avail of education loans against fixed deposits from SBI without premature closure of the deposit. The loan amount is limited to 90% of the FD amount. Applicants can also avail of overdraft loans to meet their financial needs.
- The minimum loan amount must be INR 25,000 and the maximum amount should not exceed INR 5 crores.
- The loan can only be offered from 75% to 90% of the FD amount.
- No processing charges or prepayment penalties are imposed who take SBI education loans against fixed deposits.
- The interest rate is 1% above the relative fixed deposit rate. Further, the bank charges interest on a daily reducing balance.
- SBI education loan disbursement is also transparent, online, and hassle-free allowing easy access to funds on loans against FD.
Also Read: Check out our blog on SBI RinN Raksha education loan insurance that can help you save from unforeseen circumstances.
ICICI Bank
ICICI Bank also offers education loans against fixed deposits. Applicants can choose to either apply for a personal loan for education or an Instant education loan from ICICI Bank. Besides education loans, one can also avail of loans against FD up to INR 10 crores for business loans.
- ICICI personal loans for education can be availed up to INR 50 lakhs and applicants can pledge their fixed deposits as securities.
- There are no foreclosure charges.
- Minimal documentation makes it easier for applicants to apply for education loans against fixed deposits.
- Up to 90% of the FD amount can be availed as an education loan against fixed deposits.
- ICICI instant education loans also allow applicants to apply for education loans against fixed deposits.
- ICICI Bank interest certificate can help you claim tax deductions under Section 80E of the Income Tax Act.
HDFC Bank
HDFC Bank is another popular private-sector bank in India that allows applicants to avail of education loans against fixed deposits via overdraft facilities. Students can easily fulfil their urgent financial needs without breaking their FDs and taking loans against them.
- Aspiring students can avail up to 90% of overdraft on their FD for HDFC education loans to study abroad.
- A minimum amount of INR 25,000 is required to avail education loan against FD or overdraft against FD.
- You can easily apply through the HDFC net banking facility or visit the nearest bank branch.
Documents Required for Education Loan against FD
The applicant must submit various documents to apply for an education loan against fixed deposits with any bank. The major documents include the duly filled loan application form and the fixed deposit certificate you’re using as a security. However, the banks may require other documents as listed below-
- Application form: Fill out and sign the loan application form provided by the bank.
- Fixed deposit certificate: A copy of the FD you’re using as collateral for the loan.
- ID proof: Photocopies of documents like your passport, Aadhaar card, PAN card, or driver’s license.
- Address proof: This could be utility bills, rental agreements, or your voter ID card (photocopies).
- School admission proof: An official letter confirming your enrollment or acceptance by the educational institution.
- Course details: Information about your program, including tuition fees and its duration.
- Co-borrower income proof (if applicable): If you have a co-signer (like a parent), provide documents showing their income, such as salary slips, tax returns, or bank statements.
- Your academic records: This includes mark sheets and certificates from your previous studies.
- Collateral documents: These documents formalize the FD as loan security (may vary by bank).
- Bank statements (if applicable): The bank might request your bank statements for the past 6 months.
Also Read: Planning for loan refinancing to get lower interest rates? Check out the documents required for education loan refinancing.
How to Apply?
Applying for education loans against fixed deposits is easy. Applicants can simply visit the bank branch in which they have applied for fixed deposits. One can also apply online via their website, mobile applications, or internet banking. Check out how you can apply-
- Visit the nearest bank branch. Fill out the application form and attach FD certificates. This option is ideal for Axis Bank.
- HDFC Bank education loans against FD can be applied through Net Banking. You need to head to the accounts section, click on transact, and then click on overdraft against FD.
- ICICI education loans against FD can be applied through their official website or via the Vidya Lakshmi Portal.
This was all about education loans against fixed deposits. It is ideal to assess the pros and cons to see if education loans against FD align with your financial goals or not.
FAQs
Education loans against fixed deposits mean taking a loan for higher education by pledging fixed deposits as collateral/ security with the banks. If you fail to repay the education loan, banks have complete rights to seize the fixed deposits in loans against FD.
Yes, many banks like Axis Bank, SBI, ICICI Bank, and HDFC Bank offer education loans against fixed deposits in India. The loan amount and tenure depend on the terms and conditions of the respective bank.
The loan amount will be the partial percentage of your fixed deposit value. This percentage varies depending on the bank, but it often ranges from 75% to 90% of the FD amount.
Banks like Axis Bank, SBI, ICICI Bank, and HDFC Bank offer education loans against fixed deposits. They offer you financial assistance without having to liquidate your fixed deposits.
Interest rates on education loans against fixed deposits are typically lower than on unsecured education loans. Axis Bank education loan against fixed deposit interest rates range from 7% to 10.05% and the SBI interest rates are 1% above the relative fixed deposit rate.
Some common types of collaterals accepted for education loans are housing property, gold, mutual funds, and non-agricultural lands. Interestingly, education loans against fixed deposits are becoming popular among many.
Education loans offer benefits like lower interest rates and minimal processing fees. There’s usually no penalty for paying off the loan early. This gives you more flexibility.
Although education loans offer benefits like lower interest rates, minimal processing fees, and prepayment flexibility, they also come with limitations. The loan term is tied to your FD’s maturity, and you risk losing access to the FD’s full value and potential earnings.
Applying for education loans against fixed deposits is easy. Applicants can simply visit the bank branch in which they have applied for fixed deposits. One can also apply online via their website, mobile applications, or internet banking.
To know more about education loans, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
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