For Quick Alerts
ALLOW NOTIFICATIONS  
For Daily Alerts

How To Use Your Fixed Deposit To Fund A Car?

|

One of the first investment that an individual almost always tends to make is a fixed deposit. Seldom does one see another investment ahead of fixed yielding instruments. The one good thing about these deposits, is that they are liquid and you can take a loan against these fixed deposits.

How To Use Your Fixed Deposit To Fund A Car?
Now, say you wish to buy a car, but decide that you might want to take a car loan for the purpose. What we suggest is avoid taking a car loan and go for a loan against a fixed deposit - that is if you have one. So, take a overdraft against the fixed deposit and pay for the car.
 

How does it work?

You can avail a loan of as much as 85 per cent, against your fixed deposit. It is actually, not a loan, but just an overdraft.

So, you would probably end-up paying 2-2.5 per cent, over and above the interest rate contracted on the FD.

If your Bank fixed deposit fetches you an interest rate of 8 per cent, you might get the loan for around 10 per cent.

Now, there are a few things you should remember. Each bank will give you an overdraft against the bank's own deposit. For example, Axis Bank is clear that the overdraft would be against the bank's own FD.

What are the advantages of overdraft from a FD, rather than an auto loan

There are plenty of advantages. The first is that you do not have any processing fee. So, straight away you save money. The second is that you can pre-pay, which is another big advantage. There are no prepayment charges.

The third is that you remain the sole owner of the vehicle.

Remember, do not break the deposit without any reason, if you can afford to pay the EMI. These days interest rates have dropped and it would be good to talk to several banks before you decide.

In the end, you might be able to get a much better rate of near 2 per cent, over and above the fixed deposit interest rate.

GoodReturns.in

Read more about: fixed deposit car loan
Company Search
Get Instant News Updates
Enable
x
Notification Settings X
Time Settings
Done
Clear Notification X
Do you want to clear all the notifications from your inbox?
Settings X
We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more