1. What is Interest Calculation on Loan Against FD?

Interest calculation on loan against Fixed Deposit determines the interest amount payable when taking a loan secured by a fixed deposit. The formula accounts for the loan amount, FD value, interest rate, and time period.

2. How Does the Calculator Work?

The calculator uses the interest calculation formula:

Where:

• \( I \) — Interest amount (currency)
• \( P \) — Loan amount (currency)
• \( FD_{value} \) — Fixed Deposit value (currency)
• \( r \) — Annual interest rate (decimal)
• \( t \) — Time period (years)

Explanation: The formula calculates the interest payable on the net loan amount (loan amount minus FD value) over the specified time period at the given annual interest rate.

3. Importance of Interest Calculation

Details: Accurate interest calculation is crucial for financial planning when taking loans against fixed deposits, helping borrowers understand the total cost of borrowing and make informed financial decisions.

4. Using the Calculator

Tips: Enter loan amount and FD value in currency units, annual interest rate as a decimal value (e.g., 0.05 for 5%), and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the typical interest rate for loans against FD?
A: Interest rates are usually 1-2% above the FD interest rate, making it cheaper than personal loans.

Q2: How does FD value affect the loan amount?
A: Banks typically offer 75-90% of the FD value as loan amount, depending on the institution's policies.

Q3: Can I get a loan against my existing FD?
A: Yes, most banks allow loans against existing fixed deposits without breaking them prematurely.

Q4: What happens if I default on the loan?
A: The bank can liquidate your fixed deposit to recover the outstanding loan amount and interest.

Q5: Are there any processing fees for such loans?
A: Some banks charge nominal processing fees, while others offer this facility without additional charges for their customers.