Why and How to Avail Car Loan Against Fixed Deposit?

Updated on Wednesday, August 26th, 2026 | By IndusInd Bank

Whether you are a seasoned investor or a beginner, you would have heard of Fixed Deposits or FDs. They are praised for their popularity and how they are ideal for safe and steady returns.

However, did you know that you can also use your fixed deposit as collateral for a car loan? Applying for a car loan against FD is an efficient way to make use of your savings to finance a vehicle without breaking your FD. Let’s explore more in this article.

How to Get a Car Loan Against an FD?

The process to get a car loan against Fixed Deposit requires you to pledge your FD as collateral to secure a loan. 

The process is usually straightforward:

1. Check Eligibility and Documents: Banks will require you to be an existing FD holder with a certain minimum deposit amount. You will need to provide basic KYC documents, income proof, and details of your FD.

2. Apply: You can apply for a car loan against an FD online through the bank’s app or by visiting your nearest branch. Fill out the form and clarify that you will use your FD as collateral. 

3. Receive Loan Amount: The loan amount is generally a percentage of your FD’s value. Once the loan is approved, the amount will be transferred to your bank account. 

Documents Required to Avail a Car Loan Against FD

You need to submit the following documents to avail a car loan against FD:

• FD certificate or statement
• Identity Proof like Aadhaar Card, PAN Card, driving license, etc.
• Proof of Residence like utility bills, passport, etc.
• Application form
• Any other document requested by the bank

Benefits of Applying for a Car Loan Against an FD

You can expect the following positive outcomes if you use your FD as collateral for a car loan:

1. Continued Interest Earnings

Despite using your FD as collateral, it continues to earn interest at the agreed-upon FD rates. This dual benefit allows you to earn returns while availing a loan to purchase your car.

2. Lower Interest Rates

When you provide collateral for a loan, you can enjoy lower interest rates compared to unsecured loans. Banks will offer competitive rates for a car loan taken against an FD. 

3. Loan Top-Up Option

Depending on your eligibility and the bank’s policy, you may get the option to avail a top-up loan against your FD. This can provide you with additional financial support.

Also Read: 5 Benefits of Loan Against Fixed Deposit that You Should Know

Points to Remember Before Using Your FD for a Car Loan

Taking a car loan against a fixed deposit offers many benefits. However, it is essential to consider a few precautionary points:

1. Loan Limit

The loan amount may be limited to a percentage of the FD value. Ensure that the loan you receive is sufficient to cover your car purchase needs.

2. FD Lock-In

In many cases, the FD will remain locked until the loan is repaid. You will be able to withdraw funds from the FD only after the loan is settled.

3. Interest Difference

While you earn interest on the FD, the loan interest rate may be slightly higher. Consider the net cost of the loan by calculating the difference between the interest earned and the interest paid.

4. Impact on Financial Plans

Using your FD as collateral may impact your financial plans, especially if the FD was for a specific future goal. Ensure this decision aligns with your overall financial planning.

Also Read: Different Types of Fixed Deposits

Car Loan Against FD Interest Rates

For a car loan against a fixed deposit, banks usually charge an interest rate that’s 1-3% higher than the interest rate your FD earns. Suppose you are earning 7% p.a. on your existing FD. Then, the bank may offer a car loan against your FD at 8-9% p.a.

Regular car loan rates typically depend on the lender, vehicle type, credit score and tenure. And in some cases, a car loan against FD can be comparatively affordable than a standard car loan.

Loan Amount Offered in Car Loan Against FD

For a car loan against a fixed deposit, you typically get the loan amount that’s equivalent to a certain percentage of your FD value. For example, some banks offer a car loan ranging from 75% to 90% of your FD amount. Let’s understand this with some examples:

Conclusion

A car loan against a fixed deposit is an excellent option for using your savings to finance a vehicle. However, you must assess your financial situation and needs before pledging your FD. 

IndusInd Bank offers competitive FD rates, easy online account opening, and a range of tenure options to suit your financial goals. Our online FD Calculator allows you to get an idea of your returns, as per the interest rate and tenure, so that you can make the right financial decision. 

By choosing IndusInd Bank, you ensure that your FD works for you so that you can enjoy growth and peace of mind. Book a Fixed Deposit with IndusInd Bank now.

FAQs

How much loan can we get against FD?

The exact amount depends on your FD value and bank’s terms and conditions. Typically, banks offer 75% to 90% of the FD value as a loan.

Does Car loan against FD affect credit score?

Yes, taking a car loan against your FD may impact your credit score as your bank report such loans and their repayment status to credit bureaus.