When signing up for an FD, people either think of safety or returns – rarely anyone thinks of the interest rate a bank would charge for a loan against FD. A loan against FD is one of the quickest ways to raise money in an emergency. If you are looking at funds during an emergency, you have the option to either take a loan against FD or withdraw it prematurely. At that time, if three-year FD rates were higher than a five-year, the bank will only levy a penalty. You should only withdraw it prematurely if your fund requirement is as much as the FD amount or more, and there's still some years left for FD maturity.

Source: Mint May 29, 2021 11:48 UTC