FD Break vs Loan Calculator Break the deposit, or borrow against it? See what each one costs you.
Breaking an FD costs more than the penalty on the bank's page: the rate falls back for the whole deposit, and the rest is re-booked at today's rate. Borrowing against it costs interest that is not tax-deductible. Enter your deposit and your need, and both routes are compared on the same day — your FD's original maturity date.
Your fixed deposit
If you break it
What you need
The cheaper route
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Both routes on the same date
Everything is counted to your FD's original maturity date, after tax.
| Line | Borrow against it | Break it |
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What the penalty line does not tell you
Break a ₹5 lakh FD to use ₹2 lakh and all ₹5 lakh is repaid at the lower rate for the whole time it ran. RBI's directions pay interest for the period the deposit actually stayed, not the contracted rate.
On a deposit that paid interest monthly or quarterly, the excess paid at the old rate is recovered when you close it. You get back less than you put in.
Spent on personal needs, the loan's interest gets no deduction while the FD's interest is fully taxed. That is why borrowing wins for short needs and loses for long ones.
A loan or overdraft against an FD runs only to the deposit's maturity. What is still owed then is recovered from the deposit.
Five-year tax-saving FDs can be neither withdrawn early nor used for a loan, except on the depositor's death. Deposits above ₹1 crore may have been taken without a premature withdrawal option.
How the two routes are compared
The calculator follows your money to one date — the day your FD would have matured — so the two routes can be compared fairly.
Borrowing against the FD
The deposit runs untouched to maturity at its own rate. You borrow what you need and pay interest on it for the months you keep it, then repay it in full. That interest is the cost of this route. The bank marks a lien on the deposit, and the loan is only available from the bank that holds the FD.
Breaking the FD
The whole deposit is paid out now, with interest for the months it ran at the lower of your rate and the bank's rate for that shorter period, less the penalty. You use what you need and re-book the rest at today's rate for the months the old deposit had left. When you would have repaid the loan, the same money goes into a fresh deposit instead. On a deposit that paid interest out, the excess already paid is taken back from the principal.
Tax
Deposit interest is taxed at your rate on both routes. Loan interest for personal use gets no deduction. The result is shown after tax, along with the borrowing period at which the two routes cost the same. Our guide on breaking an FD versus borrowing against it walks through a full example.
Which rate does the bank use when I break an FD?
RBI's directions require interest for the period the deposit actually stayed with the bank, not the contracted rate. In practice most banks apply the lower of your contracted rate and their card rate for that shorter period, as published when you opened the deposit, and then deduct the penalty.
Can the bank charge a penalty it never told me about?
No. Under RBI's directions the components of the premature withdrawal penalty must be made known to the depositor when the deposit is accepted. If they were not, no penalty can be levied.
Is an overdraft against an FD cheaper than a term loan against it?
Often, for an uneven need. An overdraft charges interest only on the amount actually drawn, for the days it is drawn, so repaying in parts costs less than this calculator assumes. It treats the full amount as borrowed for the whole period.