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-   -   Car Loan against Fixed Deposits (https://www.team-bhp.com/forum/indian-car-loans-insurance/51179-car-loan-against-fixed-deposits.html)

Fountainheader 26th December 2008 11:04

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 ?

aka_iitd 26th December 2008 12:23

Did your FD will earn interest during that period. I think not. See all terms and condition

Fountainheader 26th December 2008 12:32

Quote:

Originally Posted by aka_iitd (Post 1107018)
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.

trrk 26th December 2008 12:52

Hi,

Quote:

Originally Posted by Fountainheader (Post 1107035)
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.

Fountainheader 26th December 2008 13:08

Quote:

Originally Posted by trrk (Post 1107058)
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 :)

trrk 26th December 2008 13:36

Hi,

Quote:

Originally Posted by Fountainheader (Post 1107078)
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!

subscrive 26th December 2008 14:12

"I" bought OHC few months ago using this way...
No issues at all.

Your effective loan interest rate will be hardly 2% or so. :)

GTO 26th December 2008 14:21

Unsurprising since the banks risk is effectively zero. Good tip!

aka_iitd 26th December 2008 14:24

Quote:

Originally Posted by Fountainheader (Post 1107078)
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%

Fountainheader 26th December 2008 14:27

Quote:

Originally Posted by aka_iitd (Post 1107150)
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 :D

DCEite 26th December 2008 14:29

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?

luky_13 26th December 2008 14:31

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 ?

aka_iitd 26th December 2008 15:37

Quote:

Originally Posted by luky_13 (Post 1107161)
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 (Post 1107157)
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

nishantgandhi 26th December 2008 17:01

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?

trrk 26th December 2008 17:22

Hi,

Quote:

Originally Posted by luky_13 (Post 1107161)
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 (Post 1107305)
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 (Post 1107305)
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 (Post 1107305)
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!


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