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Can You Get a Loan Against an FD with a Low CIBIL Score in 2026?

Blog by Aliceblue News Desk

29 May 2026

9 minutes

Can You Get a Loan Against an FD with a Low CIBIL Score in 2026? - featured image

Life doesn’t wait for your credit score to improve.

One month you’re fine, and the next you’re staring at an unexpected expense, a hospital bill, a supplier payment that can’t be delayed, or just an opportunity that won’t sit around while you figure out your finances. You need money. Your CIBIL score is sitting somewhere it probably shouldn’t be. And every bank’s website seems to be telling you the same thing: 750 or higher, no exceptions.

But here’s what those websites don’t lead with: if you have a fixed deposit or an investment portfolio, there’s a very good chance you can still borrow, and the credit score conversation becomes almost irrelevant.

Loan Against Fixed Deposit and Loan Against Securities both exist precisely for situations like this. They’re secured loans, which means your asset does the convincing, not your credit history.

So, Can You Actually Borrow with a Low CIBIL Score?

Yes. Often, quite easily.

The whole point of collateral is that it changes the lender’s risk calculation from the ground up. When a bank gives you a personal loan, it’s trusting your track record, your repayment history, your income stability, and the number sitting in your credit report. When you pledge an FD or a securities portfolio, the bank isn’t trusting your history anymore. It’s holding something real. Something it can recover from if things go wrong. That’s a completely different conversation, and it goes much more in your favour when your CIBIL score isn’t great.

People with scores in the 500s, people with no credit history at all, people who’ve had a loan default years ago, many of them have still accessed FD-backed loans without issue, because the lien on the deposit is all the security the bank needs.

What Score Do Lenders Actually Expect in 2026?

  • Loan Against FD: Most banks don’t publish a minimum because there isn’t one in the traditional sense. The deposit is sitting right there in their system, marked with a lien the moment the loan is sanctioned. Even a score of zero or -1 is usually fine. Some lenders will still run soft internal checks or KYC verification, but it rarely affects the outcome.
  • Loan Against Securities: A bit different. Because equity values move, lenders want a little more confidence in the borrower. Most prefer a score of 650 or higher, though certain NBFCs may go lower if your portfolio is solid and well-diversified. A score under 550 might still get through at some places, but you’ll likely see a reduced LTV offered rather than a flat rejection.
  • Personal loan, for context: 750+. No wiggle room at most mainstream banks.

That difference, between needing 750 and needing nothing at all, is why it’s worth knowing these options exist before you go applying for things that will pull your score down further.

Loan Against FD: Eligibility, Interest Rates, and Approval Process

  • Your fixed deposit doesn’t break. That’s the first thing to understand. A lien is placed on it, which means you can’t withdraw it while the loan is active, but the FD keeps earning interest, continues its tenure, and remains yours in every legal sense. You’re just borrowing against the value it represents.
  • Credit score requirement: For most banks, effectively zero. SBI, HDFC, ICICI, all of them have FD-backed loan products where the approval hinges on the deposit, not your CIBIL file. There may be KYC checks, there may be soft enquiries, but they’re usually formalities rather than gatekeeping.
  • How much can you borrow? In 2026, most major Indian banks will lend up to 90–95% of your FD’s value. If you have a ₹5 lakh FD, you could potentially access ₹4.5–4.75 lakh.
  • Interest rates: The standard formula is FD rate + 1 to 2%. If your deposit is earning 7%, your loan rate lands somewhere between 8% and 9%. Compare that to a personal loan at 18–24%, and the difference is stark; you’re paying roughly a third of what an unsecured loan would cost you.
  • How fast? Very. Many banks now process FD-backed loans entirely within their mobile banking apps, sometimes within minutes if your KYC is already complete. No branch visit, no physical paperwork in many cases, no waiting three days for someone to call you back.

Loan Against Securities: CIBIL Score, LTV, and Risks

Shares, mutual funds, and bonds can all be pledged as collateral under a Loan Against Securities, and the structure is broadly similar to the FD route. The difference is that a fixed deposit holds its value perfectly, while your equity portfolio doesn’t. Markets move. Sometimes sharply.

Credit score requirement: Lenders generally want to see 600–700. The securities are still collateral, but because their value can drop, the bank wants some reassurance that you’re not someone who defaults the moment things get uncomfortable. Under 550, you’re looking at a higher chance of either rejection or a significantly reduced borrowing limit.

LTV ratios in 2026 (post RBI/SEBI guidelines):

  • Equity shares and equity mutual funds: 50–75% of current market value
  • Debt mutual funds and bonds: up to 85%

The margin call, this matters more than most people realize: If the market falls hard and your portfolio value drops below a certain threshold, the bank can ask you, sometimes urgently, to either pledge more securities or repay a chunk of the loan to restore the LTV ratio. This is called a margin call, and it tends to happen at exactly the moment when markets are crashing, and you have the least liquidity available. It’s not common, but when it happens, it’s stressful. Keep a cash buffer somewhere.

Loan Against FD vs Personal Loan vs Loan Against Securities

Feature

Loan Against FD

Loan Against Securities

Personal Loan (Unsecured)

Min. CIBIL Score

Not Required

600 – 700

750+

Typical Interest Rate

8.5% – 9.5%

9% – 11%

12% – 24%

Processing Time

Instant

24 – 72 Hours

1 – 5 Days

Income Proof

No

Yes (Usually)

Mandatory

End Use

Any Purpose

Any Purpose

Any Purpose

Can a Loan Against FD Improve Your CIBIL Score?

Here’s something most people don’t think about when they’re in a low-score situation: a loan against FD isn’t just a borrowing option; it’s also a credit repair tool if you use it right.

Take a small loan. Doesn’t need to be large. Pay the EMIs on time every month for six to twelve months without missing a single one, and keep your utilization below 30% of the sanctioned limit. Credit bureaus track repayment behaviour, and a clean, consistent record, even on a modest secured loan, starts building your score upward in a way that nothing passive ever will.

It won’t fix years of damage overnight. But six months of clean repayment history on a secured loan will do more for your CIBIL score than six months of doing nothing and hoping it improves.

Things to Check Before Taking a Loan Against FD or Securities

  • The 2026 LTV ratios your specific bank is applying; these shift with RBI/SEBI updates and aren’t always the same across lenders
  • Whether you’re getting an overdraft facility or a term loan, the interest calculation works differently for each.
  • Your ability to handle a margin call if you’re going the securities route, if that scenario would wipe you out, keep a buffer
  • Your utilization discipline, borrowing 95% of an FD overdraft limit and sitting there, will hurt your credit score even though the approval didn’t require one.

 

Conclusion

If your CIBIL score is holding you back, don’t start by applying for a personal loan. A rejection doesn’t just mean no; it leaves a hard inquiry on your credit file, which pushes your score down further, which makes the next application harder. It’s a bad cycle to start.

Look at what you already have instead. A fixed deposit is probably the most straightforward collateral available to most Indian borrowers right now, with a low rate, fast processing, no income proof, and almost no credit score dependency. A securities portfolio gives you something similar while keeping your investments intact and working for you, as long as you’re comfortable with the margin call possibility.

Check the LTV ratios with your lender directly before you apply. They do change.

Interest rates, LTV ratios, eligibility criteria, and credit assessment policies differ across banks and NBFCs. Always confirm the current terms with your lender before proceeding.

Frequently Asked Questions

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Yes, completely. Pledging creates a lien, which stops you from selling or withdrawing, but it doesn’t transfer ownership or redirect income. FD interest keeps getting credited, stock dividends keep arriving, and mutual fund bonuses and splits apply as normal. Nothing changes on that front until the loan is cleared and the lien is removed.

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You can’t, not directly. The pledge has to be released first, which means clearing the outstanding loan balance and formally requesting lien removal from the lender. Once that’s done, the securities are fully yours again to sell, transfer, or do whatever you want with. Some digital lending platforms have made this process faster than it used to be, but exact timelines still depend on your lender.

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Yes, and this one catches people off guard. The approval may not have depended on CIBIL at all, but how you use the facility afterward is reported to credit bureaus as credit utilisation. Sitting at 90–100% of your limit consistently signals dependency, and it pulls your score down. The general target is to stay below 30%, borrow what you need, repay it, and don’t treat the full sanctioned limit as a permanent balance.

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Only if the borrowed money is used for business purposes. If you take the loan for personal reasons, travel, a family event, or home expenses, there’s no deduction available. But if the funds go into your business, the interest paid becomes a business expense and reduces your taxable income accordingly. Keep documentation of end use either way, because you’ll need it during filing.

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In most cases, no. Banks have compliance obligations around accounts held by minors, and guardianship rules make pledging those deposits complicated enough that most lenders simply don’t allow it. A few may have specific provisions, but you’d need to check with your bank directly, and realistically, don’t count on it being straightforward.

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Since your loan rate is pegged to your FD rate, typically, the FD rate plus 1 or 2 percent, a change in one technically affects the other. But here’s the practical reality: most fixed deposits run at a locked rate for their entire tenure, so unless your FD matures and gets renewed at a different rate mid-loan, your interest cost stays stable throughout. When renewal does happen, it’s worth checking what the new rate does to your loan pricing.

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  • No. This is a hard restriction under the Income Tax Act; 5-year tax-saving FDs cannot be pledged as collateral and cannot be withdrawn before maturity under any circumstances. If you want to take a loan against a fixed deposit, it has to be a regular FD, not one opened specifically for the Section 80C deduction. Two completely different products, regardless of how similar they look on the surface.

 

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Blog by Aliceblue News Desk

The Alice Blue Research Team is a passionate group of analysts delivering expert market insights, comprehensive coverage of stocks, economy, commodities, and personal finance through clear, actionable research.

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