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How To Use Fixed Deposits To Get A Car Loan...

25 May 2016, 10:30 AM

The good old FD or Fixed Deposit has long been the go-to investment option of choice for people since decades. Even as newer investment options emerged with the opening up of the economy, the FD held on to a place it could call its own. With the rise in disposable income and aspirations of people, India soon embarked on an automotive revolution. Buoyed by supportive car finance schemes, many people began to live their automotive dream.

Today, there is an exhaustive market of new cars waiting to be driven out of the showrooms. As buyers flock to dealers, looking for the best deal out there, the humble car loan against fixed deposit is starting to rise in popularity once again. Let’s take a closer look at them from behind the trench lines:

★     One of the crucial things to bear in mind is that the world of car finance treats borrowings against fixed deposits as an overdraft facility. It is not a loan in the technical terms per se. This is because, the money in the fixed deposit, belongs to the borrower. He/she is merely using it as collateral with the lender, to cover the amount being borrowed.

★     What makes the car loan against fixed deposit so attractive for car buyers is that the interest rates are generally two-three percent lower in comparison to regular auto loans. Thus, not only is the money there to be borrowed, it is also available at a lower interest rate than regular products.

★     Lenders typically do not extend the borrowing to cover the entire fixed deposit amount. It is usually capped at the 80-85% mark.

★     Lenders usually don’t levy any processing/miscellaneous fees on car finance availed under such conditions. Moreover, there’s no add-on charges either, should one choose to pre-pay the loan after a certain period.

★     Most importantly though, in the case of regular car loans, it is the lender who holds the ownership rights over the vehicle. Should the borrower default, the lender is well within their right to repossess the car in order to recover the loan. In the case of fixed-deposit based car finance, the borrower continues to remain the sole owner of the car. He/she merely needs to repay the borrowed amount or it gets deducted from the fixed deposit against which the funds were drawn.

So now that you know the benefits of borrowing against fixed deposits, do you still want to opt for a regular car loan? Hit us up in the comments below to give the answer & tell us why you chose the option that you did.

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