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.
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 avail the loan.
Loan against FD is also considered an overdraft facility. Depending on your FD issuer, you can get up to 95% 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.
That’s not all. 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.
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. Once you have submitted the form/ request, the issuer will process it and transfer the loan amount to your preferred account upon approval.
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 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
Since a car loan on fixed deposit is different from a conventional loan, the interest rates for the same are also different from the conventional interest rates for a loan. Generally, issuers offer the loan at interest rates that are a little 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.
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 penalty associated with it.
Most issuers offer a loan on fixed deposit without a processing fee which further reduces your cost of borrowing.
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 installments, 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.
The amount you can avail as a car loan on fixed deposit depends on certain factors, but most importantly your FD issuer. Generally, issuers offer a loan of up to 95% of your investment amount.
So, if you have an FD of ₹5,00,000, your loan amount can be up to ₹4,75,000. However, if you have a non-callable (non-cumulative) deposit, the loan amount is generally on the lower side.
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.
To ensure that you choose the right option, look at the expected FD returns as well as added advantages like availing 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.
The information provided by BFDL herein above is related to the Non-Partnered Banks/ NBFCs and is just for the purpose of information and under no circumstances the information provided hereinabove is intended to be source of advice or recommending any financial investment advice or endorsement of any sort.
The information including interest rates with regard to fixed deposit, provided on this website is gathered through publicly available sources over the internet and is considered as accurate and reliable to the best of our knowledge. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers by the Non-Partnered Banks. The use of information set out is entirely at the User’s own risk and User should exercise due care prior taking of any decision, on the basis of information mentioned hereinabove. You are advised to visit/ contact the respective Banks/ NBFCs to verify the information before making any investment or opening an account. Further, BFDL does not undertake any responsibility or liability to update this information. YOU ARE SOLELY RESPONSIBLE FOR ANY LIABILITY OR DAMAGE YOU INCUR THROUGH ACCESS TO OR USE OF THE SITE OR SUCH INFORMATION OR MATERIALS EXCEPT WHERE THE LAWS AND REGULATIONS OF A PARTICULAR JURISDICTION CONCERNING WARRANTIES CANNOT BE WAIVED. Additionally, display of any trademarks, tradenames, logo and other subject matters of intellectual property owners. Display of such Intellectual Property along with the related product information does not imply BFDL’s partnership with the owner of the Intellectual Property of such products.
The eligibility criteria for availing a car loan against FD is simple; you must have a valid FD account with the issuer you intend to borrow from.
The maximum amount you can avail through a car loan against FD depends on the issuer and your FD value. Generally, the loan amount under this facility can go up to 95% of your investment amount.
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.
No, you cannot avail car loan against fixed deposit that qualifies as a tax saver. Loans against FD are only available under certain types of FD.
Yes, joint FD investors need to visit the issuer’s office/ branch to avail a loan against the FD.