A loan against your own assets means borrowing against something you already own. You do not sell the asset, and you do not take an unsecured personal loan.
It is one of the least understood corners of Indian retail banking, and the reason is simple. Five genuinely different products get discussed as if they were one idea.
They are: a credit card against a fixed deposit, a loan against mutual funds, a loan against a PPF balance, an overdraft against a fixed deposit, and an overdraft against your salary account.
This guide takes each of the five in turn. Wherever the lender publishes its actual terms, those are the numbers used here.
One of them, the government rule on PPF loans, is reported wrongly on a large share of the finance content already online.
| Product | What secures it | Typical limit | Rate |
|---|---|---|---|
| Credit card against FD | Fixed deposit | Up to 90% of FD | Card’s normal rate if unpaid past due date |
| Loan against mutual funds | MF units (lien via CAMS/KFintech) | 70% (equity) / 80% (debt) of NAV | 10.75%–11.75% p.a. |
| Loan against PPF | PPF balance | 25% of balance, 2 years prior | 1% p.a., or 6% p.a. if late |
| Overdraft against FD | Fixed deposit | Up to 90% of FD value | Deposit rate + ~1 percentage point |
| Overdraft against salary | Salary credit | Up to 3x salary, capped at ₹5L | From 16% p.a. |
Rates and limits are as published by the specific institutions cited in this guide and change over time: verify current terms with the lender before applying. The PPF figures are the only ones set by law rather than by a lender's discretion.
1. Credit card against a fixed deposit
This is a secured credit card. The bank puts a lien on your fixed deposit and issues a card against it. A lien just means the bank blocks the deposit so you cannot withdraw it while the card is live.
Because the deposit is the security, the bank does not check your income or your credit history. That makes it the standard way in for people with no CIBIL score at all: students, first jobbers, freelancers, and NRIs coming back to India with no domestic credit record.
- Credit limit
- Up to 90% of the FD: ₹45,000 on ₹50,000, ₹90,000 on ₹1 lakh, ₹2.7 lakh on ₹3 lakh.
- Minimum FD
- ₹50,000, for at least 180 days, in auto-renewal mode.
- The FD itself
- Keeps earning its normal rate.
- Limit
- One secured card per customer.
Other issuers such as SBI, HDFC and Axis offer similar cards, commonly reported at minimum deposits as low as ₹15,000.
The limit is rarely the point of this product. The credit history is.
Use it and repay on time and it reports to the credit bureaus exactly like a normal card. That is what makes it the usual route to a first CIBIL score for someone who cannot yet qualify on income alone.
2. Loan against mutual funds
Here the lender marks a lien on your mutual fund units, which are held with CAMS or KFintech. It then lends against them. You do not have to sell a single unit.
Your investment stays invested and keeps growing. The only restriction is that the units backing the loan cannot be sold until you repay.
- Loan-to-value
- Up to 70% of NAV on equity funds, 80% on debt funds. RBI caps equity-fund LTV at 75%.
- Maximum loan
- ₹1 crore digitally.
- Interest
- 10.75% to 11.75% a year, charged only on what you draw.
- Charges
- Processing up to 2% of the loan; renewal ₹2,500 plus GST a year; penal charge 5% a year on the withdrawn amount if you default.
| Fund type | Loan available | 6-month interest at 10.75%–11.75% | Processing charge (2%) |
|---|---|---|---|
| Equity (70% NAV) | ₹3,50,000 | ₹18,812 – ₹20,562 | ₹7,000 |
| Debt (80% NAV) | ₹4,00,000 | ₹21,500 – ₹23,500 | ₹8,000 |
Interest computed at simple interest for 6 months on the full sanctioned amount; actual interest is charged only on the amount drawn and for the period drawn, so a lower average utilisation reduces the real cost. The processing charge is one-time and non-refundable regardless of how briefly the loan is held.
One comparison this guide cannot make for you. Selling the units instead of borrowing can trigger capital gains tax. Whether borrowing works out cheaper depends on how long you have held them, how much you have gained, and your tax slab.
Work out your own capital gains tax first. Do not assume the loan wins. Which category your fund falls into decides how those gains are taxed.
3. Loan against a PPF account
Read this section carefully, because the interest rate quoted for it across most of the internet is wrong.
The figures below come from the scheme rules themselves, the Public Provident Fund Scheme, 2019 as amended, published by the National Savings Institute. They are not taken from how other finance sites describe those rules.
- When
- From the third financial year of the account to the end of the sixth.
- How much
- 25% of the balance at the end of the second year before the year you apply.
- How often
- One loan a year, and none until the previous one is repaid with interest.
- How
- Form-2, submitted to the accounts office.
Separate from a PPF withdrawal, which opens only after the fifth financial year on a different formula.
The claim: A PPF loan costs the PPF interest rate plus 1%. What the record shows: Paragraph 9(2) of the Scheme sets a flat 1% a year on the principal, unconnected to the PPF rate, charged after the principal is repaid and settled in at most two monthly instalments. False.
Our calculation from Paragraph 9. Miss the 36-month limit by one month and the Scheme does not add a month of penalty; it replaces 1% with 6% for the entire loan, from the first month.
4. Overdraft against a fixed deposit
This is the sibling of the FD-backed credit card above, and it is worth keeping the two apart.
Instead of a card, the bank opens a credit line against the deposit itself. SBI’s published terms allow up to 90% of the deposit’s value. You pay the deposit’s own rate plus about one percentage point.
Interest is charged only on what you actually draw, worked out on a daily reducing balance. There is no processing fee and no charge for repaying early.
We worked through this product in depth, including an example where borrowing against a ₹5 lakh FD beat breaking it by nearly ₹15,000, in our guide to FD, RD and the overdraft against a deposit. Here it matters for where it sits among the five: after the PPF loan, it is the cheapest borrowing on this list, because the collateral is cash the bank already holds.
- Credit line
- Up to 90% of the deposit.
- Interest
- The deposit rate plus about one percentage point, only on what you draw, on a daily reducing balance.
- Fees
- No processing charge and no prepayment penalty.
5. Overdraft against a salary account
This is the odd one out. There is no FD, no mutual fund and no PPF balance behind it.
The bank lends against the fact that your salary arrives in their account every month. That is a completely different kind of security from an FD-backed overdraft. The two are easy to confuse, because banks call both of them an “overdraft”.
- Credit line
- Up to three times monthly salary, capped at ₹5 lakh: ₹90,000 on ₹30,000, ₹1.8 lakh on ₹60,000, ₹3 lakh on ₹1 lakh, and the ₹5 lakh cap from ₹2 lakh a month.
- Interest
- From 16% a year, paid monthly on the amount used. No EMI.
- Tenure
- 12 months, renewable, with no renewal fee. Close it any time without penalty.
- Eligibility
- Pre-approved and offer-based: the limit depends on the bank’s own appraisal, not a fixed formula.
Before you pledge anything
Against an unsecured personal loan, borrowing against your own assets is cheaper almost every time. The lender is already holding security, so it charges less for the risk.
But “cheaper than a personal loan” is a low bar, and these five are not interchangeable.
The PPF loan at 1% is the cheapest borrowing most Indians will ever get. It also carries the sharpest penalty here. Miss the government deadline by one month and you do not pay one month of penalty. The whole loan is repriced.
A loan against mutual funds keeps a long-term investment intact through a short-term cash need. The rate is roughly in line with a personal loan. Add up the fees before you compare it with simply selling the units.
A secured credit card against an FD is rarely about the limit. It is how you build a first credit score. Its sibling, the overdraft against the same FD, is close behind the PPF loan on cost, because the bank is lending against cash it is already sitting on.
A salary overdraft is the only one with no asset behind it. That is exactly why it is the most expensive on the list. Before taking one, it is worth checking what else lenders attach to a credit line without saying so.
One number is worth carrying away from all five. On a PPF loan, ₹3,000 of interest becomes ₹18,500 if you are a single month late.
If you take one loan from this list, put its repayment date somewhere you will actually see it.
Frequently asked
- What is a loan against your own assets?
- It is credit secured by something you already own (a fixed deposit, mutual fund units, a PPF balance, or your salary credit) rather than an unsecured personal loan or selling the asset outright. Because the lender already holds security, these products are typically cheaper than a personal loan and faster to sanction, and in most cases the underlying asset keeps earning its own return while pledged.
- How much credit limit does a credit card against FD give?
- Up to 90% of the fixed deposit amount, per ICICI Bank’s published terms, with a minimum FD of ₹50,000 and a minimum tenure of 180 days. The FD must be in auto-renewal mode and continues to earn its own interest while it secures the card.
- What is the interest rate on a loan against mutual funds?
- ICICI Bank publishes 10.75% to 11.75% per annum, with a 2% non-refundable processing charge and a ₹2,500 annual renewal fee. The loan-to-value is up to 70% of NAV for equity funds and up to 80% for debt funds, with a ₹1 crore ceiling for digital applications. Rates vary by lender and by the specific fund pledged.
- Is the PPF loan interest rate really the PPF rate plus 1%?
- No: this is a widely repeated error. The Public Provident Fund Scheme, 2019 (Paragraph 9) sets the loan interest at a flat 1% per annum on the principal, unrelated to the prevailing PPF interest rate, charged only after the principal itself is repaid. It is not “PPF rate plus 1%” as many finance sites describe it. Separately, if the principal is not fully repaid within 36 months, the rate is not merely raised: 6% per annum applies retroactively to the entire loan period from the date it was drawn, replacing the 1% rate for the whole term.
- How much can I borrow against my PPF account?
- Up to 25% of the balance that stood in the account at the end of the second financial year before the year you apply: not your current balance. The facility is available only between the third and sixth financial year after the account was opened; PPF withdrawals, a separate facility, open up only after the fifth year.
- What is the difference between an overdraft against FD and an overdraft against salary?
- One is secured by a fixed deposit, the other by nothing but your salary credit. An overdraft against FD is typically priced about one percentage point above the FD’s own rate, because the bank is lending against cash it already holds. An overdraft against salary needs no deposit at all, HDFC Bank’s Salary Plus starts from 16% per annum, and the higher rate is the price of that facility requiring no collateral.
