How loans against fixed deposits work
Some banks let you borrow against a fixed deposit, or FD, instead of breaking it early. The deposit stays in place as security and keeps earning interest, and the bank lends up to a share of it, set by the bank.
The loan rate is often set a little above the rate your deposit earns. If you don't repay, the bank can use the deposit to clear the debt.
Worked example
Borrowing £10,000 at 6% over 12 months costs £860.66 a month, £10,327.97 in total, so £327.97 is interest.
Over 6 months the payment is £1,695.95 and the interest falls to £175.73. Over 24 months the payment drops to £443.21, but the interest rises to £636.95.
Interest is worked out monthly at one twelfth of the annual rate. Lenders may calculate interest differently (some charge it daily), so your actual payments can differ slightly.
Borrow or break the deposit?
Compare the interest on the loan with what you'd lose by closing the deposit early, including any penalty. Some lenders also let you repay in one go when the deposit matures, rather than monthly. Check how your offer works.
Inputs for the FD loan calculator
Amount to borrow
The amount you want to borrow against your deposit.
Interest rate (per year)
The annual interest rate on the loan, not the rate your deposit earns. The rate shown is only an example, so enter the rate from your quote.
Term
How many months you'll repay over. This is often no longer than the deposit has left to run.
CALCULATOR QUESTIONS
FD loan calculator questions
What is an FD loan?
A loan secured on a fixed deposit, so you can borrow without closing the deposit early.
How much can I borrow against a fixed deposit?
Usually up to a share of the deposit's value, set by the bank.
Does my deposit keep earning interest?
Usually, yes. Check your bank's terms.
What if I don't repay?
The bank can use the deposit to clear what you owe.