Break FD vs Take Loan
Should you break your FD or borrow? Let the numbers decide.
FD Details
Rate reduction applied by bank on early closure
Loan Details
Tax Bracket
You save ₹1,334 with this option
Breaking your FD saves you ₹1,334 compared to taking a loan.
Cost of breaking FD: ₹67,960 | Cost of loan: ₹69,294
Cost Comparison
Total cost of each option side-by-side
Loan Cost Breakdown
How the loan amount is distributed across principal, interest, and fees
Detailed Comparison
Side-by-side breakdown of both options
| Parameter | Break FD | Take Loan |
|---|---|---|
| Amount Available / Borrowed | ₹5.00 L | ₹5.00 L |
| Interest Lost / Paid | ₹57,960 | ₹59,294 |
| Tax Impact | Tax saved: ₹14,490 | No tax benefit |
| Penalty Cost | ₹10,000 | N/A |
| Processing Fee | N/A | ₹10,000 |
| Total Cost | ₹67,960 | ₹69,294 |
| Monthly Outflow | None | ₹23,304/mo |
| Verdict | Break FD saves ₹1,334 | |
How This Works
This calculator compares the true cost of two ways to get money when you have an existing FD:
The verdict depends on whether the interest you would lose (plus penalty) by breaking the FD is more or less than the loan interest and fees. Lower FD rates and higher loan rates favour breaking the FD; higher FD rates and lower loan rates favour keeping the FD and borrowing.
Calculator results are for illustration purposes only. Actual returns may vary based on market conditions, fund performance, and other factors. Mutual fund investments are subject to market risks. Read all scheme-related documents carefully before investing. Past performance does not guarantee future returns.
Break the FD to repay the loan, or keep both?
It feels odd to hold a fixed deposit earning 6–7% while paying 9% on a loan — you are effectively losing the difference every year. But the decision is not automatic: breaking the FD removes a liquid safety net, and the comparison has to be made after tax, because FD interest is taxed at your slab while the loan saving is not.
This calculator compares your FD’s after-tax return against your loan’s interest rate, so you can see whether using the deposit to repay the loan actually leaves you better off. The usual answer, once tax is included, is that if the loan rate exceeds the post-tax FD return you gain by repaying — but only keep enough of the FD to preserve your emergency buffer.
How this calculator works
- 1Enter your FD amount and interest rate, your tax slab, and the loan rate.
- 2The calculator computes the FD’s after-tax return and compares it with the loan rate.
- 3It shows whether repaying the loan or keeping the FD leaves you better off.
Frequently asked questions
Should I break my FD to repay a loan?
Compare the FD’s after-tax return with the loan’s interest rate. If the loan rate is higher than what the FD earns you after tax, repaying the loan usually leaves you better off, because the interest saved is effectively a tax-free, risk-free return. Keep enough liquid savings for emergencies before repaying.
Why compare after tax?
FD interest is added to your income and taxed at your slab, so a 7% FD might yield only around 5% after tax for someone in a higher bracket. The loan saving, by contrast, is not taxed. Comparing the FD’s pre-tax rate with the loan rate would understate the case for repaying.
Should I keep any FD after repaying?
Yes — do not empty your safety net to clear a loan. Retain an emergency fund of a few months’ expenses in liquid, low-risk form. Use only the surplus beyond that buffer to repay the loan, so an unexpected expense does not push you back into high-cost borrowing.
Illustrative and for education only; confirm tax treatment with a Chartered Accountant.
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