Should I break FD to repay personal loan India?

Almost always yes. Personal loans at 10-24% cost far more than FD post-tax return of 4.9-5.6%. Our calculator shows exact savings.

What is real FD return after inflation India?

Real return = FD rate x (1 - tax%) - inflation. At 7% FD, 30% tax, 5.5% inflation: 4.9% - 5.5% = -0.6%. Negative real return!

When should I keep FD instead of repaying loan?

Keep FD when: home loan rate is below 9% with 24b tax deduction, FD is your only emergency fund, or loan has heavy prepayment penalty.

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Loan vs FD Calculator India 2026

Should you break your Fixed Deposit to repay a loan? Get instant verdict with inflation-adjusted, post-tax real return comparison and year-by-year timeline.

Loan Outstanding Amount

Rs.

Loan Interest Rate (p.a.)

FD Amount Available

Rs.

FD Interest Rate (p.a.)

Your Income Tax Slab

Expected Inflation Rate

Loan Remaining Tenure

years

When to Break FD vs Keep It

❌ Break FD — Repay Loan

Personal loan >10.5%
Credit card debt >36%
Loan rate > FD post-tax return
Stressed EMI every month
Multiple FDs available
FD penalty is low (<0.5%)

✅ Keep FD — Don't Break

Home loan with 24b deduction
Only emergency fund
FD matures in <3 months
High prepayment penalty
Joint FD complications
FD pledged as collateral

How Inflation Destroys FD Real Returns

FD looks attractive at 7%, but after tax and inflation the real return is often near zero or negative:

Post-tax FD (20% slab) = 7% × (1−0.20) = 5.6% Real return after 5.5% inflation = 5.6% − 5.5% = +0.1% only Post-tax FD (30% slab) = 7% × (1−0.30) = 4.9% Real return after 5.5% inflation = 4.9% − 5.5% = −0.6% (NEGATIVE!) Personal loan at 10.5% real cost = 10.5% − 5.5% = 5.0% real burden You are losing 5.1–5.6% every year by keeping FD instead of repaying loan!

FD Premature Withdrawal Penalty India 2026

Bank	Penalty	Condition
SBI	0.50%	Below contracted rate
HDFC Bank	1.00%	Below contracted rate
ICICI Bank	0.50–1.00%	Varies by tenure
Axis Bank	1.00%	Below contracted rate
Post Office FD	2.00%	Only after 6 months

Frequently Asked Questions

Almost always yes. Personal loans at 10.5–24% cost far more than FD post-tax return (4.9–5.6%). After inflation adjustment, FD real return is nearly zero. Breaking FD to repay personal loan saves 5–18% annually. Exception: if this FD is your only emergency fund.

Home loans at 8.5–9.5% are close to FD post-tax returns. Plus home loan interest is deductible under Section 24b (up to Rs.2L in old regime), reducing effective cost. A 9% home loan with max deduction at 20% tax effectively costs 7.2%. With FD post-tax at 5.6%, the gap is small. Use our calculator for your specific numbers.

Real return = FD post-tax rate − inflation rate. At 7% FD, 30% tax, 5.5% inflation: 4.9% − 5.5% = −0.6%. At 20% tax: 5.6% − 5.5% = +0.1%. FD barely beats inflation for most Indians, making loan repayment far more beneficial.

TDS at 10% if annual FD interest exceeds Rs.40,000 (Rs.50,000 for senior citizens). Submit Form 15G (under 60) or 15H (60+) if income is below taxable limit. TDS is not final tax — declare total FD interest in ITR and pay/claim refund per your slab.

RBI mandates zero prepayment penalty on floating-rate home loans. Fixed-rate loans may have 2–5% prepayment charge. Even with 2% penalty on Rs.5L = Rs.10,000 one-time cost vs saving Rs.50,000+ in interest over 3 years — still worth it. Use our Prepay Analysis tab.

Yes, most banks allow partial FD withdrawal. Break only what you need for loan repayment while keeping the rest as emergency fund. SBI allows breaking in minimum deposit units. This is the smartest approach — partial prepayment reduces EMI burden while maintaining liquidity.

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