This amazing bank fixed deposits special feature makes them a very smart investment option for you

The conventional investment option - fixed deposit - remains highly popular for investors even as mutual funds, stock market and other forms of investments have come up and some have even taken giant strides since the dawn of the new millennium. Bank fixed deposits promise uniform return flows that are more reliable than equity linked schemes. Investors can also claim income tax deduction on investments of up to Rs 1.5 lakh as per Section 80-C. All major banks offer fixed deposit schemes and the interested investors must compare the rates offered by them before picking up the one that suits them best. The minimum amount to be invested also differs from bank to bank. 

However, due to comparatively low returns promised by these schemes, more investors these days are tempted to put money in other products. Also, fixed deposits come with a lock-in period of five years which is a disadvantage against open-ended schemes like mutual funds. 

But, there is one special feature of bank fixed deposits that make them a smart investment option any day. If the investor is in need of money before the maturity of the fixed deposit, he or she doesn't need to liquidate the fixed deposit (FD). They will only end up losing out on the interest in that case and will also have to pay the penalty amount. 

Instead, the investors can take a loan against their FD. This helps them stay in the product and get the loan at lower rate of interest. 

Tax expert Sunil Garg told Zee Business Online that since investors can take loan against fixed deposits for immediate use, it still makes them a good investment option. "In some cases, even FDRs are very good investment. Even though they give fixed returns, they can be used to take loan if money is required for an immediate use," he said. 

How to take loan against Fixed Deposit (FD)?

1. Log on to the bank portal and log in to internet banking.

2. Go to fixed deposit option and click on ‘Overdraft against FD’ option.

3. Fill in the required details and sumit the application. 

4. The loan will be approved withing few days and a confirmation will be sent to the investor through email or SMS. 

Another benefit for investors in this case is that they keep earning interest on fixed deposit scheme even if the loan is sanctioned by the bank. This interest can be used for the prepayment of the loan.