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Loan or breaking fd

Ritu (Articled assistant) (120 Points)

08 July 2014

Is opting for a loan @ roi of 10.15% a beter option or breaking of fd @ roi of 9% before charging 1% penalty a beter option. Please guide.

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6 Replies

aakash (accountant) (41 Points)
Replied 08 July 2014

as u have to pay intetest of 10.15% on a fresh loan whereas if u break ir fd than u will have a loss of 9% interest, its advisable by me to break ur fd as u will get funding at lower rate of interest or opportunity cost whereas same would have been more in case of a fresh loan.

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 08 July 2014

if your requirement is for short term then its better to take loan.... but if it is long term requirement then breaking fd is a better option.

Sahil Bhatia (Practicing Chartered Accountant) (290 Points)
Replied 09 July 2014

Break even is around 4 months Less than this - Loan is better more than this FD is better

PRASAD KUMAR .M.G (STUDENT) (41 Points)
Replied 09 July 2014

If we withdraw the FD before five years for which deduction is availed in the previous year is taxable in the year in which it is withdrawn

Minesh Rawat (Article) (199 Points)
Replied 09 July 2014

Loan against fd is better option ritu even i hv taken so

Rohit A Kadam (Chartered Accountant) (321 Points)
Replied 09 July 2014

Is this personal or for business purposes? Interest paid on loan is tax deductible and interest income on FD will be taxed if it is for business or profession. Hence the difference in both the rates will be the incremental interest that will be paid.

If it is for personal use, then interest paid on loan is not deductible, hence it may be worth using the FD than going for a new loan. Alternatively banks give 90% of loan on FD which may be explored.