Are you planning to study further but don’t want to break your Fixed Deposit (FD)? Good news! You can get an education loan using your FD as security. This is called an education loan against FD interest rate. It is one of the easiest and cheapest ways to get a loan for your studies. The best part is, the interest rate is lower than other loans. In this blog, we will explain how the interest rate works, how to calculate it, and which banks offer good options. Don’t worry—it’s all written in simple words with easy examples.
Also Read: How to Get Education Loan Without Collateral and Co Applicant?
📖 What Is an Education Loan Against FD?
An education loan against FD is a secured loan, where the bank gives you money for education by keeping your FD as a guarantee. You don’t need a credit score or extra documents if you already have an FD in the bank.
💡 Why FD-Backed Loans Are Cheaper?
Banks give lower interest rates because your FD is their security. If you don’t repay the loan, the bank can recover the money from your FD.
🔢Education Loan Against FD Interest Rate
🏦 How Is Interest Rate Calculated?
The interest rate is calculated like this:
Interest Rate = FD Interest Rate + Spread (usually 1% to 2%)
Example:
If your FD gives 6.5% interest and the bank adds 1%, then:
👉 Loan Interest Rate = 6.5% + 1% = 7.5% per annum
This is much lower than regular education loans which usually charge 10% to 13%.
📋 Interest Rate Comparison Table (2025)
| Bank Name | FD Interest Rate | Spread (extra %) | Loan Interest Rate | Notes |
| SBI | 6.5% | 1% | 7.5% | No processing fee |
| ICICI Bank | 6.75% | 1% | 7.75% | Online “Insta Education Loan” |
| HDFC Bank | 7.0% | 1% | 8.0% | Overdraft against FD |
| Axis Bank | 6.5% | 1.5% | 8.0% | Minimum loan ₹25,000 |
| Bank of Baroda | 6.5% | 1.5% | 8.0% | Easy processing |
(Note: Rates are approximate and may change. Please check with the bank.)
📊 Simple Calculation Examples
✅ Example 1
FD Amount: ₹5,00,000
FD Interest Rate: 7%
Loan Spread: 1%
Loan Interest Rate: 7% + 1% = 8%
Loan Amount Offered: 90% of FD = ₹4,50,000
Interest per year on Loan: ₹4,50,000 × 8% = ₹36,000
So, you will pay ₹36,000 interest in 1 year.
✅ Example 2
FD Amount: ₹3,00,000
FD Interest Rate: 6.5%
Loan Spread: 1.5%
Loan Interest Rate: 8%
Loan Amount Offered: 85% of FD = ₹2,55,000
Interest in 1 year: ₹2,55,000 × 8% = ₹20,400
🧮 Key Points to Remember
- You still earn interest on your FD while using it as loan security.
- Your FD will stay locked until you repay the full loan.
- Interest is charged only on the loan amount, not the FD value.
- No need to break your FD early.
- Tenure of loan = Tenure of FD (you must repay before or with FD maturity).
✅ Advantages of Education Loan Against FD
- ✅ Low interest rate (much cheaper than personal loans)
- ✅ Fast approval
- ✅ No income proof required (if you own the FD)
- ✅ Helps build credit history
- ✅ Continued FD returns
⚠️ Disadvantages
- ❌ FD gets locked till loan is repaid
- ❌ If you don’t repay, bank can take FD
- ❌ Loan amount is limited (max 90% of FD)
- ❌ Loan period = FD tenure (can’t extend it)
📝 How to Apply for the Loan
- Visit your bank branch or log in to your net banking.
- Fill the loan application form.
- Submit your FD details and KYC documents.
- If needed, submit your college admission proof.
- Get approval and disbursal within 1–3 working days.
❓Who Can Take This Loan?
- Students who have FD in their name
- Parents can take a loan against their FD for child’s education
- FD must be in the same bank where you are applying
📑 Documents Required
- FD certificate or account number
- Student’s ID and college admission proof
- KYC documents (Aadhaar, PAN, etc.)
- Income proof (if required)
🎓 When Should You Choose This Loan Option?
Choose education loan against FD if:
- You have enough money parked in FD
- You want lower interest rate
- You don’t want to apply for regular unsecured loan
- You need money quickly and without much paperwork
📌 Conclusion
Education loan against FD interest rate is a smart and easy way to fund your studies at a low cost. You get money without breaking your FD and enjoy lower interest rates. It’s perfect for students who already have an FD or whose parents can help with one. Always compare interest rates and read the bank’s terms carefully. With proper planning, you can reduce your loan burden and focus more on your studies. So, if you’re looking for quick and affordable funds for your education, consider this simple and safe option.