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