Use Your Fixed Deposit To Get A Car Loan

By | December 13, 2017

Did you know that you can use your Fixed Deposit as collateral for a loan? It’s true! We’ll tell you all about it right here!

Use your Car Loan to get a Fixed Deposit

Fixed Deposits are a common means of saving money. Many of us have invested in an FD at some point or another. You probably already know about the interest rates and flexibility a Fixed Deposit offers. But did you know that it’s also possible to apply for a loan against your FD account?

It’s true! Many top-tier banks in India offer loans against Fixed Deposits. So, if you’re thinking about taking a loan to buy something like a car, for example, keep your FDs in mind. They can really come in handy as a form of collateral.

How does it work?

When you apply for a Car Loan against your Fixed Deposit, the bank treats it as a demand loan or overdraft against your deposit. You can take a loan of up to 90% of the total value of your Fixed Deposit. Many top-tier banks like Axis Bank, SBI, HDFC, and ICICI offer Car Loans against FDs.

Benefits of taking a Car Loan against your Fixed Deposit

Applying for a Car Loan against a Fixed Deposit has a number of benefits:

  • The biggest benefit is that the rate of interest on this loan is much lower than that of a normal Car Loan. This is because loans against Fixed Deposits are deemed to be secured loans. Therefore, the interest rate charged on your Car Loan is just 2 – 2.5% more than the interest you get on your FD. For instance, if your FD account gives you an interest of 8% annually, the interest charged on your Car Loan (against your FD account) will be 10%.
  • You can choose any tenure for repayment, but it must not exceed the tenure of your Fixed Deposit.
  • Most banks do not charge any processing fee for this kind of loan.
  • Loans against Fixed Deposits are a smart means of getting short-term funds. This can be done without breaking your FD or paying huge EMIs, as is the case with regular Car Loans.
  • Finally, loans against Fixed Deposits are available to self, third-party individuals and corporate organisations as well.

Application process

Applying for a Car Loan against your Fixed Deposit is pretty simple. The documentation required is minimal since the banks already have the necessary information. However, you need to attach your Fixed Deposit receipt(s) while submitting your loan application. Quite simple and hassle-free.

Repaying your loan

Most of the time, banks offer a flexible EMI repayment plan on the loan amount. However, in the case of preferred customers, banks can choose to let them repay a lump sum amount when they have the means to do so. Check with your bank about the repayment options available. You might be eligible for a special offer.

Additional Reading: Credit Card Against Fixed Deposit

Points to remember

These are some important things you should be aware of when applying for a Car Loan against your Fixed Deposit:

  • If the FD account is a joint one, then the other person will also have to sign the loan documents.
  • Banks can close the Fixed Deposit to recover the debt amount in case you fail to repay the loan.
  • The tenure of the loan can never exceed the tenure of the FD account.
  • You will continue to get the interest on your Fixed Deposit account on the underlying deposit.
  • You cannot close or break the FD after applying for the loan.

Now that you know all about taking a Car Loan against your FD account, how about taking that first step and opening a Fixed Deposit?

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit for the latest rates/offers.

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