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How to Get a Car Loan Against a Fixed Deposit

How to Get a Car Loan Against a Fixed Deposit

How to Get a Car Loan Against a Fixed Deposit

One of the most valuable services a Fixed Deposit (FD) offers is that it can be used to get a car loan. Apart from being a safe investment method, it also gives investors a chance to avail themselves of tax benefits. You can also use an FD to get a loan at a lesser rate.

This type of car loan is unconventional and is typically considered an overdraft. The person applying can continue earning interest on the FD even after taking the loan. This is why it is an intelligent decision to take a car loan against a fixed deposit.

With a Shriram Finance Limited (SFL) fixed deposit, you can invest your hard-earned money in a secure account with assured returns. You cannot only avail of loans against the FD but also get one of the highest interest rates for your investment.

How to Apply for a Car Loan Against FD?

Applying for a car loan against a fixed deposit is very simple. The application process requires few documents. It also won't take long to get approved. However, the eligibility criteria require the applicant to be over 18 years with a valid fixed deposit to apply for a car loan against an FD.

Here are the steps to apply for a car loan against an FD:

Step 1: Contact your preferred bank or Non-Banking Financial Company (NBFC) to get a car loan against your fixed deposit.

Step 2: Fill out a loan application form to apply for an overdraft against your FD.

Step 3: Submit your FD receipts to the lender.

Step 4: Your FD will be accepted as a mortgage by the lender, and the loan amount will be transferred directly to your bank account.

Documents Needed to Apply for a Car Loan Against a Fixed Deposit

As mentioned earlier, you only need to submit a few documents to apply for a car loan against a fixed deposit. This is because the person applying for the loan already has an account with the bank.

Here are the documents you will need to submit:

  • Duly filled and signed application form
  • Fixed deposit receipts that are discharged in favour of the lending bank
  • Signed agreement

Car Loan Against FD and Interest Rates

When you apply for a loan using an FD as collateral, the bank will consider it a demand loan or an overdraft against the FD account. Usually, the interest rate for this type of loan is only 2% - 3% more than the interest paid on an FD. This rate of interest is much lesser than when compared to the interest rate charged for regular car loans. An ordinary car loan can charge an interest rate ranging from 9% to 12%, sometimes even higher.

Loan Amount Against Fixed Deposit

Banks in India are likely to sanction approximately 70% to 90% of the fixed deposit amount as a loan. This may vary from bank to bank. Banks can also provide a higher loan amount if you have a good credit score and history.

The tenure of the loan is always the same as the tenure of the FD. You can take a car loan for a period that is lesser than the FD tenure but not more. If the term of your fixed deposit is five years, the loan tenure can range anywhere between one year and five years. However, it cannot be more than five years. Most banks in India do not avail of any penalties or foreclosure charges if the customer closes the loan earlier than the tenure of the loan.

Features of a Car Loan Against an FD

Below are the basic features you need to keep in mind while deciding if you want to apply for a car loan against a Fixed deposit:

  • You can avail of vehicle finance of up to 90% of the total value of your fixed deposit. The final amount that will be sanctioned will depend upon the institution lending the finances.
  • Usually, the interest rate charged by the lender in this type of loan is 2 to 3% more than the interest you are earning on your FD. If you make an average of 8% annual interest on your FD, the lender can levy an interest rate of 10 to 11% on your car loan.
  • In most cases, banks or other lending institutions do not charge processing fees. This typically happens when a car loan is taken against a fixed deposit. However, additional charges, such as stamp duty and pre-closure costs, may apply.
  • You can choose the repayment tenure of your loan, as long as it is not a more extended amount of time than the tenure of your FD. If your Fixed deposit tenure is five years, you can only choose a tenure between one and five years.

Benefits of availing of a car loan against FD

There are several advantages and benefits of applying for a car loan against a fixed deposit.

  • Lower interest rate - The most significant benefit is that the interest rate charged by the lender on this type of loan is much lower than a regular car loan.
  • Tenure Selection - You have flexibility with selecting the repayment tenure of your fixed deposit. However, it would help if you remembered that the car loan tenure could not exceed the fixed deposit term.
  • No processing fee - In most cases, there is no processing fee or charges for availing of a car loan through this method. This is an excellent feature as it helps reduce the overall cost of the loan.
  • Hassle-free application process - Application for such a car loan is very easy and requires very few documents. Because there is no complicated procedure, the loan gets sanctioned faster. The application process is user-friendly, and many banks offer the facility to apply online without hassle.
  • No need to break the FD - The best part of applying for a car loan in this way is that you can get a quickly sanctioned loan without having to break your FD. At the same time, you can also continue earning from the fixed deposit.


Now that you know all the benefits and features, you can confidently apply for a car loan against a fixed deposit. If you do not yet have a fixed deposit, open an Shriram Unnati FD to achieve your future goals. You can use the Shriram Fixed Deposit Interest Calculator to get the exact interest rate for an investment of your choice.

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