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Car Loan Against FD

While the main benefit of having an FD is that you can safely grow your wealth, there are other benefits that make it a great option. Being a safe investment method, FDs also offer guaranteed returns and tax benefits. Moreover, FDs can be leveraged to get different types of loans, including a car loan. 


Read on to learn how a car loan against FD works, the benefits and processing of availing one, and more.

Loan Against FD To Buy A Car

Car loans are generally secured loans and you will have 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 collateral against the loan. 


Loan against FD is considered an overdraft facility depending on your FD issuer, you can get up to 95% of your FD value as loan, depending on the issuer. Applying for a car loan with a fixed deposit is much simpler, easier and quicker than a traditional car loan. 


That’s not all; the key benefit of getting a loan against FD is that it saves you from withdrawing before the investment tenor ends, which could otherwise result in a loss of income. This means you can continue growing your wealth while acquiring the funds to get a car.

Steps To Apply For A Car Loan Against FD

Depending on the lender offering the loan, there are a number of 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. You need to fill out the application form and furnish other required documents and information. 

Documents Required for Car Loan against FD

Since you already have an account with the FD issuer, the documents required for getting a car loan against fixed deposit are very few. The documentation process has already been carried out when opening the FD account, leading to minimal documentation for a car loan against FD.


However, some issuers may require some basic paperwork. To confirm the requirement, 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 

  • Signed agreement

Interest rates on Car Loan against FD

Since a car loan on fixed deposit is different from a conventional loan, the interest rates for the same also vary from the regular car loan range. Since this loan is treated as an overdraft or demand loan, it attracts an interest rate that is marginally higher than the FD rates you receive.


As a result, the interest rates on this car loan are generally lower than that of a traditional car loan. This allows you to make your borrowing cost-effective and achieve your goals without risking your current and future financial wellness.

Tenor and repayment process of a car loan against FD

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


Based on the terms of your loan, 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 tenor 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. It is generally advised that you should opt for an option where you do not have to pay additional or hidden costs to keep costs in check.

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 nature because the interest rates are marginally higher than the FD rates. This may result in your loan interest rates being comparatively lower than that of a regular loan, reducing your borrowing costs.

  • Through a car loan on FD, you secure your earnings from attractive interest rates, which would have been lost in case of premature withdrawal.

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

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


  • ✔️Who can apply for a car loan against Fixed Deposit?

    The eligibility criteria for a car loan against FD is simple; you must have a valid FD account with the issuer you intend to borrow from.

  • ✔️What is the maximum loan amount I can avail of under this facility?

    The maximum amount you can avail through a car loan against FD depends on the issuer and your FD value. Some issuers may allow to avail a loan against FD for up to 95% of the FD value.

  • ✔️What are the foreclosure charges for a Car Loan Against FD?

    Foreclosure charges and other charges for loans against FD depend on the issuer, but generally, there are no foreclosure charges for a car loan on fixed deposit.