Car Loan Against FD

While the primary benefit of having a fixed deposit (FD) is that you can safely grow your wealth, other benefits make it a great investment option. They offer guaranteed returns and tax benefits, enhancing their appeal as a financial tool. 

Another notable advantage is that you can get a car loan against FD. It means you can use your FD as collateral to secure a car loan while your FD continues to earn interest. 

By leveraging your investment in this way, you can enjoy the benefits of both your investment and the loan without having to liquidate your savings.

Loan Against FD to Buy a Car

Car loans are generally secured loans, requiring you to pledge your new vehicle as security. This is one way to go about it, and the other is to get a car loan against FD. Here, you use the fixed deposit as a collateral/security to get the loan.

A loan against FD is also considered an overdraft facility. Depending on your FD issuer, you can get up to 90% of your FD value as a loan. Applying for a car loan against a fixed deposit is simpler, easier and quicker than a traditional car loan.

The key benefit of getting a car loan on FD is that it saves you from the penalty and loss resulting from a premature withdrawal. This means you can continue growing your wealth while acquiring the funds to get a car.

How to Apply for a Car Loan Against FD

Depending on the lender offering the loan, there are several ways in which you can complete the application process. You can apply for a car loan against FD through mobile or internet banking or by visiting the issuer’s branch. Usually, the issuers offer car loans against FD provided you already have an existing FD account with them.

Here are the steps that you could follow:

1. Contact your preferred bank or Non-Banking Financial Company (NBFC) to inquire about a car loan against FD

2. Complete the loan application form to apply for an overdraft against your FD

3. Provide the lender with your Fixed Deposit receipts as proof of the deposit

4. The lender will evaluate your FD and accept it as collateral

5. The loan amount will be transferred directly to your bank account upon approval

Documents Required for Car Loan Against FD

Since you already have an account with the FD issuer, the documentation process has already been carried out. As such, the documents required for getting a car loan against a fixed deposit are minimal.

However, some issuers may require some basic paperwork. To confirm the documents required, visit the lender’s website or contact the branch. Generally, you may be required to submit the following:

• Accurately filled application form with your signature

• Fixed deposit receipts discharged in the lender’s favour 

• Fixed deposit certificate

• Signed agreement

Key Features of a Car Loan Against Fixed Deposit

Before taking a car loan against a fixed deposit, you should know some key features, which are given below:

• Instant Overdraft Facility

This feature of a car loan against a fixed deposit gives you instant access to funds through an overdraft facility. To ensure there is no delay in the car-buying process, the lender will make the required funds available as soon as they approve your auto loan.

• Retaining Earnings on Your FD

Your FD continues earning interest at the agreed rate, even when used as collateral for a car loan. This way, your investment grows while supporting your financial needs.

• Flexible Loan Repayment Options

Car loans against fixed deposits offer customisable repayment plans. Align repayments with your income, choose fixed or flexible EMIs, or prepay the loan early without penalties.

• Loan Renewal and Top-Up Opportunities

It is convenient to renew or increase your loan. If the value of your FD has increased, you may be able to borrow more against it. It provides you with more financial flexibility without having to apply for a new loan.

• Enhanced Security and Peace of Mind

A loan against your FD offers tangible collateral, ensuring favourable terms like lower interest rates and flexible repayment options. It is a secure solution, letting you access funds while safeguarding your investment.

Benefits of Taking a Car Loan Against Fixed Deposit

There are many ways in which a car loan against FD is beneficial for your finances. The top benefits include:

• Simpler and quicker processing time with minimal documents because the lender already has your details

• Cost-effective because the interest rates are marginally higher than the FD rates but also lower than a regular loan

• Eliminates the need to prematurely withdraw the FD and the loss as well as the penalty associated with it

• Most issuers offer a loan on fixed deposit without a processing fee, which further reduces your cost of borrowing

Tenure and Repayment Process of a Car Loan Against FD

When you get any type of loan against an FD, the repayment tenure for it is generally the same as the remaining tenure of your investment, or shorter. The repayment procedure of your car loan against a fixed deposit will work in a way similar to other borrowings.

Based on its terms, you will repay the loan in monthly instalments, which will account for your loan amount and the interest payable. You can even prepay or foreclose your car loan on FD before the repayment tenure ends.

While most lenders do not levy a penalty or other charges for prepayment, some may. You can confirm these charges with your lender before applying for the loan. Opt for an option where you do not have to pay additional or hidden costs to keep costs in check.

Here are some key points to note:

• The loan tenure is the same as the FD’s remaining tenure and cannot exceed it

• You can opt for a loan period shorter than the FD tenure

• For a 5-year or tax-saver FD, you cannot get any loan or overdraft

Car Loan Amount Against FDs

The amount you can get as a car loan on a fixed deposit depends on certain factors, but most importantly, your FD issuer. Generally, issuers offer a loan of up to 90% of your investment amount.

If you have an FD of ₹5 Lakhs, your loan amount can be up to ₹4.5 Lakhs. However, if you have a non-callable (non-cumulative) deposit, the loan amount is generally on the lower side.

Loan Tenure and Payment Procedure for Car Loan Against FD

Foreclosure Charges for a Car Loan on Fixed Deposit

Many lenders do not charge foreclosure fees if you choose to repay your loan against a fixed deposit early. This allows you to settle the loan without any extra costs. You only need to pay the following:

• The principal amount

• Interest accrued as per the interest rate

Given that getting a car loan against a fixed deposit is easy, convenient, and cost-effective, it is a smart option you should consider to fund your goals. However, to get such a service, you would need to invest in the right options.

To ensure that you choose the right option, look at the expected FD returns as well as added advantages like getting a loan against your deposit. Choose one that offers the best benefits to make the most of your investment.

On Bajaj Markets, you can find a host of FD offers to keep your investment and financial future secure. Invest today to enjoy great returns and take the first step towards wealth accumulation.