YOUR QUERIES: You can take a personal loan from a bank against your fixed deposits

Financial institutions will check for 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 the FDs and get a loan at a cheaper rate from a bank?
Yes, a loan against FD may be availed from the same bank without premature withdrawal. Your deposit continues to grow at the pre-fixed rate unhampered. You pay interest a few basis points higher than the FD rate, for the period for which you avail the loan. If you do not repay the loan, on maturity, the FD proceeds will be used to first close the loan and the balance amount transferred to you.

About 50% of my fixed income investments is parked in my Over-draft Account for my home loan in SBI. It earns 7.7% interest (saves that amount from my loan). Should I keep it here or move it to a different instrument or pay off the loan?
—Satish Nair
This is excellent management of your cash flows, interest pay-outs as well as asset allocation and rebalancing. If your cash flows allow you to take care of the EMI’s, continue with the status quo. You may look at clearing the loan only when there is a need to get loan-free.

I plan to take a top-up home renova-tion loan linked to my existing home loan account. Will I get income tax benefit on the loan and will the bank levy any pre-payment charges?
—Rajiv Anand
For tax benefits under 80C and 24B, the home loan and top-up loan will be considered as a single entity. On the pre-payment charges, refer to the sanction letter and check the fine print for terms and conditions. For a floating rate loan, there are no prepayment charges but a fixed-rate loan will have them.

A couple of years ago I defaulted on a car loan. I plan to take a home loan from the same bank, but it is refusing. Should I try other banks without disclosing the default?
—Suman Nath
Loan default gets reported by each FI and is captured in the borrower’s credit score. Get your score rectified in the same bank where you defaulted, provided you have now paid back all the dues. If not, pay off the dues first before looking for another loan. Financial institutions will check for credibility with CIBIL, Equifax or Experian, before sanctioning the loan.

The writer is founder, AZUKE Personal Finance Advisory (www.azukefinance.com). Send your queries to fepersonalfinance@expressindia.com