Car Loan Against FD – Interest rates and How to Apply?

Very often, you might have come across banks and NBFCs offering loan facilities against fixed deposits. The car loan against FD facility is one of the additional benefits provided by FD schemes besides high-yielding returns. 

As the name suggests, this facility allows you to apply for a loan by leveraging your ongoing FD investment. Keep reading for detailed knowledge on Car Loan against FD, its application process, features and benefits.

How to Apply for a Car Loan against FD?

The process to apply for a car loan against FD is quite simple and hassle-free. Most Indian banks and financial institutions offer this facility along with FD schemes.

To opt for a car loan against fixed deposits, consider following the given below step-by-step guide. 

  • Step 1: Visit the branch of your preferred bank or NBFC.
  • Step 2: Ask for a loan application form. 
  • Step 3: Fill in the necessary details. 
  • Step 4: Submit your FD receipts to the bank representative along with the application form and other required documents.

After processing your documents thoroughly, the bank will accept your FD as a mortgage and disburse the required amount to your registered bank account.

Documents Required

Here is a list of the documents required by a bank or NBFC to sanction a car loan against an FD application.

  1. Duly filled-up application form with your signature.
  2. Signed loan agreement.
  3. FD receipts.
  4. FD certificates.

Car Loan Against FD Interest Rates

A car loan against FD varies from conventional car loans in many ways. Hence, the interest rates also vary. As the bank uses your fixed deposit as leverage, the interest rate will be comparatively lower than the interest rates of traditional loans.

Usually, the interest rate for this type of loan is 2% to 3% higher than the interest applicable to FD schemes. On the other hand, the interest rate of a traditional car loan ranges between 9% to 12%. Therefore, the interest rate is lesser than the interest rates for regular car loans, making it a better alternative. 

How Much Car Loan Amount Do You Get Against FD?

The loan amount that you can avail as a car loan against FD depends on certain factors. The most prominent factor is your FD issuer. Generally, FD issuers offer a car loan against 95% of your FD amount which they hold as a mortgage.

As car loans against FD are convenient, cost-effective and easy, they can act as a great alternative to fund your financial goals. However, to make the most out of this scheme, you must first be aware of where you are investing.

To understand this more closely, let’s consider a simple example. For instance, you are applying for a car loan against FD. For this, you are planning to use your FD of ₹5,00,000. As stated earlier, the bank or NBFC considers 95% of the FD as the loan amount. Thus, the lender will sanction an amount of ₹4,75,000 as your car loan against FD. 

In case you have a non-cumulative FD, the bank will sanction a lesser loan amount. Moreover, the tenure for your car loan against FD must be lower than your FD tenure. For instance, if your FD maturity period is 5 years, the car loan against FD tenure can be anywhere between 1 to 5 years.

Features and Benefits

Let’s take a look at the basic features and benefits that you must know before opting for a car loan against FD.

  1. The interest rate in this type of car loan is 2%-3% more than the interest rate that you will earn on your FD. Let us assume that the interest rate on your FD is 7%.  In that case, the bank can charge a rate of 9% or 10% on the car loan.
  2. The borrower gets the flexibility to choose the tenure for the car loan. However, he/she must ensure that the loan tenure does not exceed the FD maturity period.
  3. 90% of your total FD amount can act as the fund to finance your vehicle. The final loan amount will depend on the discretion of the lending institution.
  4. Most banks or NBFCs do not charge any processing fee for sanctioning this loan. However, you might need to pay additional charges like stamp duty charges and pre-closure costs.
  5. The application process of this facility is quite hassle-free and user-friendly. It involves a few steps and requires minimal documentation as opposed to conventional car loans. 
  6. The interest rate that banks or NBFCs charge for car loans against FD is quite lower than the conventional car loan interest rate.


This is everything about car loans against fixed deposits and their difference from conventional car loans that you must know. This type of loan charges an interest rate depending on your ongoing FD. Therefore, consider investing in the right type of fixed deposit to make the most out of a Car Loan against FD.

Is there a penalty charge applicable for car loans against FD prepayment?

Indian banks usually do not charge prepayment fees for car loans against fixed deposits. However, you must study the terms and conditions of such a loan before applying to know about such charges.

Can I avail a car loan against tax saver FD?

No, an FD account holder cannot avail car loan against a tax-saver fixed deposit. 

Can joint account holders avail FD car loans offline?

Yes, joint account holders must visit the branch office of their FD issuer to avail a car loan against FD.Yes, joint account holders must visit the branch office of their FD issuer to avail a car loan against FD.

Who can opt for a car loan against FD facility?

The eligibility criteria to avail car loan against fixed deposit is very simple. To avail this facility, you must have an existing fixed deposit account with the issuer from whom you wish to apply for a loan.

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