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Paying interest while your FD earns?

Break the FD to clear the loan, or keep both?

  • What you'd own both ways
  • After tax on the FD interest
  • Breaking and closing fees counted
Clearing the loan leaves you richer by
₹57,641
By 2030, when the loan would have ended. Put ₹4.11 L of your FD on the loan and clear it today.
FD after tax
4.82%
Loan rate
12%
Interest saved
₹1.06 L

What you own, both ways

FD minus the loan still owed. Both pay the same ₹10,534 a month; once the loan is gone, that goes into the FD.

Your inputs

Your FD
₹
₹10K₹5 Cr
%
3%10%
Your tax slab
Your loan
₹
₹10K₹5 Cr
%
6%30%
yrs
1y30y
The switch
₹
₹0₹5 L
%
0%2%
%
0%5%
What you already holdOptional: see what breaking the FD does to your mix
yrs
1880
Comfort with ups and downs
₹
₹0₹10 Cr
₹
₹0₹10 Cr
₹
₹0₹10 Cr

Switch on to see what future amounts will buy at today's prices.

Keep your inputs as a file; it never leaves your device.

What this means

  • Your FD earns 4.82% after tax; the loan costs 12%. Every rupee on the loan saves more than it earns in the FD.
    Why?

    FD interest is taxed at your slab plus 4% cess every year, whether or not you withdraw it. Loan interest on a personal or car loan earns no tax break.

  • The loan is gone today, and ₹10,534 a month goes into savings instead, for 4 yrs.
  • Breaking the FD and closing the loan cost ₹11,497 in penalty and fees.
    Why?

    Banks cut the rate on an FD broken early, and many lenders charge 2–5% plus GST to close a personal loan early. Floating-rate loans to individuals carry no prepayment charge under RBI rules.

  • ₹88.5K stays in the FD for emergencies.
    Why?

    A cleared loan can't be drawn back. Money in an FD can, within a day. Keep a few months of spending liquid either way.

More details

The FD rate that flips it

● your assumption: 7%

Keeping the FD only wins if it pays over 15.2% before tax, 10.49% after.

Next stepCheck ₹88.5K is enough for emergenciesHow many months to keep aside for your job and family.Next stepWhere else could ₹5 L go?Emergency fund, debt, home loan or investing: in order.

How it's calculated

Both paths pay the same EMI every month until the loan was due to end, so the only difference is where the FD money goes.

  • Keep the FD: it earns its rate, taxed at your slab plus 4% cess each year, while the loan runs its course.
  • Clear the loan: the FD money, less the break penalty, goes on the loan, less the lender's fee plus 18% GST. You keep paying the same EMI, so the loan ends sooner; after that, the EMI goes into the FD.
  • What you own is the FD minus the loan still owed.

Loan interest is treated as earning no tax break, which is true of personal and car loans. Education-loan interest is deductible under 80E in the old regime; home loans are compared in the prepay-or-invest tool.

Tax figures follow Budget 2025 rules, for FY 2025-26 onward.

Common questions

Should I break my FD to pay off a personal loan?
Usually yes. A personal loan at 11–16% costs far more than an FD earns, especially after tax: a 7% FD in the 30% slab earns under 5%. Keep enough aside for emergencies first, since you can't borrow the loan back.
Is there a penalty for breaking an FD early?
Most banks pay 0.5–1% less than the rate for the time the money was actually held. On a short-held FD that can wipe out much of the interest, so check your bank's terms.
Are there charges for closing a loan early?
For floating-rate loans to individuals, RBI rules bar foreclosure charges. Fixed-rate personal and car loans often charge 2–5% of the amount prepaid, plus 18% GST on the charge.
What about taking a loan against my FD instead?
A loan against an FD costs about 1–2% above the FD rate, so it's far cheaper than a personal loan. If you want to keep the FD for a goal, swapping a personal loan for an FD loan can cut the cost.
When is keeping the FD better?
When the loan is cheap, like an education loan with an 80E deduction or a subsidised loan, or when the FD is your only emergency money. The chart shows the FD rate at which keeping it starts to win.

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