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.
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.
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.
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.
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.
Most banks in India do not avail any penalties or foreclosure charges if the customer closes the loan earlier than the said tenure.
All account holders above the age of 18 with a valid FD can apply for a loan.
Yes. However, it is advisable for joint account holders to visit the bank branch and apply for the loan.
Yes. The bank will use the funds in your FD account if you do not make payments towards your loan.
Yes. This is a mandatory process.
No. Unfortunately this facility is not available when it comes to tax saving FDs.
Yes. Those holding a joint account will have to visit the bank branch to initiate the loan application process.
The maximum amount depends on the FD amount. The maximum loan you can get is 90% of the total value of the term deposit.
Yes. This is especially true for preferred or long-term customers on most cases. Banks might also offer certain special offers.
No. This will not be possible until you settle your loan.
Yes, this is possible.