• Car Loan against Fixed Deposit

    Want to apply for a car loan? Use your Fixed Deposit (FD) to get a loan at a lesser rate. Yes! You can use your Fixed Deposit (FD) as a collateral to get a car loan sanctioned and this facility is offered by many banks in India. There are many benefits of taking a car loan against your FD. This type of car loan is unconventional and is usually considered as an overdraft. Compared to applying for a normal car loan, the application process to avail a car loan against FD is much easier and it takes lesser time to get approval. The applicant can still continue earning interest on the FD even after taking the loan, hence there is no need to even break the FD to take the loan. Most banks give out 90% of the total value of the term deposit amount as a loan and the rate of interest offered is much lesser than a regular car loan. Thus, taking a car loan against your time deposit is a very wise idea. Let us understand more about how to apply for car loans against FDs and the benefits of applying for a car loan using your term deposit in this article.

    How to apply for a car loan against FD

    It is very easy to apply for a car loan against your FD and there is very less documentation work. Many banks allow customers to apply for car loans through internet banking or mobile banking. This can be done by applying for an overdraft against your FD and by filling in the loan application form. All you need to do is to submit your FD receipt.

    Documents required to apply for car loan against FD

    • Loan application form
    • FD receipts

    Car Loan against Fixed Deposit and Interest Rates

    When an applicant applies for a car loan using his/her FD as a collateral, the bank considers it as a demand loan or an overdraft against the FD account. In most cases, the interest rate charged for this type of loan is only 2% to 3% more than what the interest paid on the FD. This rate of interest is much lesser when compared to the interest rate charged for conventional car loans, which range from around 9% to 12%, and sometimes even higher.

    Loan amount against Fixed Deposit

    Most banks in India are likely to sanction about 70% to 90%of the FD amount as a loan. This, however, depends from bank to bank. Banks can also give you higher loan amount if you have a good credit history and credit score.

    Loan tenure and payment procedure

    The tenure of the loan is always the same as the tenure of the FD. The car loan can be taken for a period that is lesser than the FD tenure but not more. For example, if the tenure of your term deposit is 5 years, the loan tenure can range anywhere between 1 year and 5 years. However, it cannot be more than 5 years.

    Foreclosure charges for Car Loan on Fixed Deposit

    Most banks in India do not avail any penalties or foreclosure charges if the customer closes the loan earlier than the said tenure.

    Benefits of taking a car loan against FD

    • Lower interest rate: To put it simply, it is much more economical to take a car loan this using your FD because you will be paying a much lesser rate of interest. This way, the cost of your loan is much cheaper than a regular loan.
    • No processing fee: In most cases, there is no kind of processing charge for availing a car loan through this method. This is a great because it will help you reduce the overall cost of the loan.
    • Hassle-free application process: Applying for this type of loan is very easy, requires very less documentation and is sanctioned faster. The application process is very user-friendly and many banks allow customers to apply online without any hassle.
    • No need to break FD: The best part of applying for a car loan this way is that you can get a loan sanctioned and at the same time continue to earn interest on the FD.


    1. What is the eligibility criteria for applying for a car loan against FD?

      All account holders above the age of 18 with a valid FD can apply for a loan.

    2. Is this facility also available to joint account holders?

      Yes. However, it is advisable for joint account holders to visit the bank branch and apply for the loan.

    3. In case of a loan default, will the bank adjust the payment against the FD?

      Yes. The bank will use the funds in your FD account if you do not make payments towards your loan.

    4. In case of joint account holders, should the other individual sign on the loan document?

      Yes. This is a mandatory process.

    5. Can you apply for a car loan against a tax saving fixed deposit?

      No. Unfortunately this facility is not available when it comes to tax saving FDs.

    6. Is it true that joint account holders cannot apply for a car loan against FD online?

      Yes. Those holding a joint account will have to visit the bank branch to initiate the loan application process.

    7. What is the maximum amount of loan that I can avail under this facility?

      The maximum amount depends on the FD amount. The maximum loan you can get is 90% of the total value of the term deposit.

    8. Do banks offer flexible EMI repayment options on FDs?

      Yes. This is especially true for preferred or long-term customers on most cases. Banks might also offer certain special offers.

    9. Can I break the FD or close it prematurely during the loan tenure?

      No. This will not be possible until you settle your loan.

    10. Can I first open an FD and the apply for a car loan on it?

      Yes, this is possible.

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