A car loan is the go to instrument when it comes to purchasing your dream car. Car loans offer finance for the purchase of both, new and used cars. The rate of interest offered, the feature and benefits of a car loan depends on the bank or financial institution offering a loan. But what many might not be aware of is that you can always take a loan against a Fixed Deposit and this applies to car loans too. Fixed deposit not only acts as an instrument that helps you build on your savings but will also aid you in availing a car loan. Let’s learn more about car loans in this article.
Unlike conventional loans, the finance offered for car loans against fixed deposit is in the overdraft form. One of the many reasons to apply for a car loan against fixed deposit as compared to a conventional car loan is that the rate of interest in the former case is 2%-3% lesser than regular car loans.
Most of the banks grant a loan of about 70%-90% of the amount deposited in the Fixed Deposit account. If you have really good credit score, you might get a loan of a higher denomination. The loan amount offered varies from each bank.
The tenure of a car loan against fixed deposit is same as the term of the deposit that is the maximum tenure one can avail. Payments for the car loan can be made through EMIs like any other regular loan.
More often than not, banks do not charge any penalty for foreclosure of car loan against fixed deposits.
Car loan against fixed deposit is a good option for those who want to avail a car loan at a lower rate of interest. It is also important to note that the borrower will continue to earn interest on the deposit despite having taken a loan against it.