Premature withdrawal from fixed deposit simply means to break the deposit before its maturity date. As this is a convenient option provided by most leading NBFCs there are other ways by which to satisfy the cash crunch. More on that later, but first let’s understand why premature withdrawal may not be a wise decision.

# Lower your returns

As you withdraw before the due date of the deposit you may lose out on some interest income. A good interest at the end of the tenure could have been used to take care of several financial obligations.

# Withdrawal charges

Most financial institutions may place a small penalty charge on premature withdrawing your fixed deposit. Basically, this penalty is calculated on the interest rate which further decreases it.

Alternatives to breaking your fixed deposit

# Loan against fixed deposit

You may consider availing a loan against your fixed deposit. This loan is cheaper than any credit card or other loan. for instance, NBFC offers loan against fixed deposit at no extra charges starting from 60% to as high as 75% of the value of the deposit. The process does not require elaborate documentation and offer quicker fund processing.

# Opt for flexible tenure

You may opt for a fixed deposit with flexible tenure – cumulative and non-cumulative. In cumulative you get interest income at the time of maturity of the deposit. While non-cumulative offers interest income at monthly, quarterly, half-yearly and annual intervals to suit your financial obligations.