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Old 26th December 2008, 11:04   #1
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Default Car Loan against Fixed Deposits

I'm planning to buy the Swift Zxi. I had the option of taking a loan from HDFC at 12%. Then my dad came up with the idea of taking a 5L loan on his FD. Guess the interest rate is just 9% in this case. With no pre-payment charges and pay-as-you-like, it sure is tempting.

Anyone else has taken a car loan against an FD ?
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Old 26th December 2008, 12:23   #2
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Did your FD will earn interest during that period. I think not. See all terms and condition
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Old 26th December 2008, 12:32   #3
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Quote:
Originally Posted by aka_iitd View Post
Did your FD will earn interest during that period. I think not. See all terms and condition
I dont think I'll be getting any interest. Instead I'll be charged 9% for it.

But the good things about it are
1: No pre-payment charges
2: Pay as I like.. atleast with SBI, there aint EMIs and all.
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Old 26th December 2008, 12:52   #4
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Hi,

Quote:
Originally Posted by Fountainheader View Post
I dont think I'll be getting any interest. Instead I'll be charged 9% for it.
But the good things about it are
1: No pre-payment charges
2: Pay as I like.. atleast with SBI, there aint EMIs and all.
Please check with the bank. You would be earning interest.

One way of getting cheaper loans is to take a loan against FD. Usually the interest charges would be 2% more than the interest rate you get for that FD.

NO EMIs, no notices, and if your FD matures, they take whatever is due to them and give you the rest.
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Old 26th December 2008, 13:08   #5
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Quote:
Originally Posted by trrk View Post
Hi,



Please check with the bank. You would be earning interest.

One way of getting cheaper loans is to take a loan against FD. Usually the interest charges would be 2% more than the interest rate you get for that FD.

NO EMIs, no notices, and if your FD matures, they take whatever is due to them and give you the rest.
Actually I should get interest. Cross checked it.

The FD interest will be accumulated as it is. The amount is used only as a collateral, and will be taken by the bank in case I default.

The FD is getting 9% interest rate, since my dad's in SBI the loan will also be charged at 9% and not the 2% higher thing. Sounds too good to be true actually
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Old 26th December 2008, 13:36   #6
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Hi,

Quote:
Originally Posted by Fountainheader View Post
since my dad's in SBI the loan will also be charged at 9% and not the 2% higher thing. Sounds too good to be true actually
Enjoy your low interest car loan! There are a few 'too good to be true' things left. This is one of them. I have used the loan from FD on several occasions. Of course with the +2% penalty!
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Old 26th December 2008, 14:12   #7
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"I" bought OHC few months ago using this way...
No issues at all.

Your effective loan interest rate will be hardly 2% or so.
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Old 26th December 2008, 14:21   #8
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Unsurprising since the banks risk is effectively zero. Good tip!
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Old 26th December 2008, 14:24   #9
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Quote:
Originally Posted by Fountainheader View Post
Actually I should get interest. Cross checked it.

The FD interest will be accumulated as it is. The amount is used only as a collateral, and will be taken by the bank in case I default.

The FD is getting 9% interest rate, since my dad's in SBI the loan will also be charged at 9% and not the 2% higher thing. Sounds too good to be true actually
In a way bank is giving you you money back without giving any interest. So in a way he is earning 9% and you are losing 9% plus gaining 3% if loan was offered at 12%
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Old 26th December 2008, 14:27   #10
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Quote:
Originally Posted by aka_iitd View Post
In a way bank is giving you you money back without giving any interest. So in a way he is earning 9% and you are losing 9% plus gaining 3% if loan was offered at 12%
I wont really term it as "losing". Atleast I wont have this "I took money from my parents even after an MBA" syndrome
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Old 26th December 2008, 14:29   #11
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I have a related question.
Supposing a person has 2-3 FDs with a Public Sector Bank. Now suppose he applies for a car loan in the same bank, but not necessarily loan against FD. Will the bank give any kind of preference and will it be easier to get the loan with minimum paperwork in that case to the customer?

Last edited by DCEite : 26th December 2008 at 14:30.
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Old 26th December 2008, 14:31   #12
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Say you took a loan of 5L against an FD of the same amount and paid religiously for a period of time and then defaulted... would the bank take the complete 5L or the value of the loan outstanding and return back the balance to you ?
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Old 26th December 2008, 15:37   #13
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Quote:
Originally Posted by luky_13 View Post
Say you took a loan of 5L against an FD of the same amount and paid religiously for a period of time and then defaulted... would the bank take the complete 5L or the value of the loan outstanding and return back the balance to you ?
They will take the balance(principal) and interest component

Quote:
Originally Posted by DCEite View Post
I have a related question.
Supposing a person has 2-3 FDs with a Public Sector Bank. Now suppose he applies for a car loan in the same bank, but not necessarily loan against FD. Will the bank give any kind of preference and will it be easier to get the loan with minimum paperwork in that case to the customer?
It depends upon the credit history bank may give preference and wavier oon processing fee etc. FD can be broken any time. If they are put into custody then only it is benefit/riskfree for bank
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Old 26th December 2008, 17:01   #14
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Hi Fountainheader,

Could you please elaborate the process of getting a car loan against FD?

Do all banks (i.e. nationalized as well as pvt sector) have this scheme? I have FDs with ICICI bank.

So effectively, one can have his FD secure with the bank, earning whatever interest it gets (currently 10.5%)?

How does the repayment take place?

What if the loan tenure exceeds the FD tenure?
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Old 26th December 2008, 17:22   #15
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Hi,

Quote:
Originally Posted by luky_13 View Post
Say you took a loan of 5L against an FD of the same amount
You can take only upto a percentage of the FD as loan, I don't remember the exact percentage.

Quote:
Originally Posted by nishantgandhi View Post
Could you please elaborate the process of getting a car loan against FD?
Sign behind the FD and apply to the bank for a loan on it. It would be processed the same day and credited into your account or you may get a pay order / DD.

Quote:
Originally Posted by nishantgandhi View Post
Do all banks (i.e. nationalized as well as pvt sector) have this scheme? I have FDs with ICICI bank. So effectively, one can have his FD secure with the bank, earning whatever interest it gets (currently 10.5%)?
I assume so. The bank does not lose here at all. But though the process is pain free, it is better oonly if your FD interest is low to get the benefit of the low interest rates. With 10.5% it would be at least 12.5%!


Quote:
Originally Posted by nishantgandhi View Post
How does the repayment take place?
What if the loan tenure exceeds the FD tenure?
There is no loan tenure as such. There is no repayment schedules or EMIs. You can pay as much as you want whenever you want. If the FD matures, you will get only the balance after deductiing all dues. The margin amount (the prinicipal that remains after your loan amount) and its interest would more than cover the extra 2% that the bank would charge you on the loan amount.

I have taken loan from my Canara Bank FD. I have no experience with FDs of other banks so far.

Please be careful. Never take a loan from your LIC!

Last edited by trrk : 26th December 2008 at 17:25.
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