Introduction
While Recurring Deposit (RD) accounts are known for their stability and returns, they also offer a lesser-known advantage: the option to secure a loan against the deposited funds. Loan Against Recurring Deposit (LARD) provides individuals with an avenue to access funds without liquidating their RD investments. This article aims to explore the concept of LARD, its features, benefits, and considerations for prospective borrowers.
What is a Loan Against Recurring Deposit?
Loan Against Recurring Deposit (LARD) is a secured loan offered by banks and financial institutions, allowing individuals to borrow against the funds in their RD accounts. The RD account serves as collateral, enabling borrowers to access funds at favorable interest rates while their RD continues to grow.
Key Features and Benefits:
- Collateralized Loan: LARD offers a secured borrowing option with lower interest rates compared to unsecured loans.
- Quick and Convenient: With minimal documentation and swift approval processes, LARD provides a hassle-free borrowing experience.
- Retention of RD Benefits: Borrowers continue to enjoy the benefits of their RD investments, including interest accrual and maturity, even after availing LARD.
- Flexible Repayment Options: LARD typically offers flexible repayment terms, allowing borrowers to repay the loan in installments over a predetermined period.
- No Impact on Credit Score: As a secured loan, LARD does not directly impact the borrower’s credit score, provided repayments are made on time.
Considerations and Precautions
- Loan-to-Value Ratio: Borrowers should ensure that the loan-to-value (LTV) ratio aligns with their borrowing requirements and financial goals.
- Interest Rates and Charges: It’s essential to review associated fees and charges to secure the most favorable loan terms.
- Impact on RD Account: Borrowers should evaluate the impact of availing LARD on their RD account, considering restrictions on withdrawals and additional deposits.
- Repayment Obligations: Assessing repayment capacity and formulating a repayment plan is crucial to avoid defaulting on the loan and adverse consequences.
Conclusion
Loan Against Recurring Deposit (LARD) offers individuals a valuable opportunity to access funds while retaining the benefits of their RD investments. By carefully considering the terms, evaluating repayment capacity, and planning responsibly, borrowers can leverage LARD to unlock financial flexibility and pursue their goals with confidence.
Disclaimer: The views expressed here are of the author and do not reflect those of Dhanvantree. Mutual funds are subject to market risks, please read the scheme documents carefully before investing.