Breaking FD in need of money is not a profitable deal:
Breaking FD in need of money is not a profitable deal: it will get less interest and a penalty will have to be paid, understand its complete math here
Many times it is seen that when there is a sudden need for money, people break their Fixed Deposit (FD). But by doing this you may have to bear the loss. Because if you break FD before maturity, you will get less interest and also you will have to pay a penalty. Here we are telling you about the disadvantages of breaking FD before maturity and the loan facility available on FD.
If you are breaking the FD prematurely, then you do not get the interest at the rate at which you have done the FD. According to the information given on SBI's site, if you break the FD before time, then you will get 1% less interest than the interest you were supposed to get on FD.
For example, suppose you have made an FD of Rs 1 lakh at the rate of 6% for 1 year, but you break it only after 6 months, the bank will pay interest on your money at the rate of 5%, not at the rate of 6%.
According to the rules of the country's largest bank SBI, if a person makes an FD up to Rs 5 lakh, then he will have to pay a penalty of 0.50% for breaking the FD before it matures. Similarly, on FDs of more than 5 lakhs and less than one crore, a 1% penalty will have to be paid for premature break.
On the other hand, after deducting up to 1% interest on FD (as mentioned above), you are given your money after charging a penalty according to the amount of FD.
Under this, you can take a loan up to 90% of the value of FD. Suppose the value of your FD is Rs 1.5 lakh, then you can get a loan of Rs 1 lakh 35 thousand. If you take a loan against FD, then you will have to pay 1-2% more interest than the interest you get on Fixed Deposit. For example, suppose that you are getting 4% interest on your FD, then you can get a loan at a 5 to 6% interest rate.
If your FD is 1 lakh rupees and you need 50 thousand rupees, then taking a loan against your FD will be right. Because this will save your savings and your money needs will also be fulfilled. On the other hand, if you need the full amount of FD, then it would be right to break your FD before time because you will get your money after a small penalty. In a loan on FD, 85 to 95% money is available as a loan.