The good old FDs or fixed deposits have been people's favorite investment option for decades. Even with the emergence of new investment options as the economy opened up, FD has remained in a place it can call its own. With disposable income and people's aspirations growing, India soon embarked on an automotive revolution. With an affordable car finance plan, many people start living their car dreams.
Today, there's a huge market for new cars waiting to roll off the showroom floor. Humble auto loans with term deposits are once again becoming more popular as buyers flock to dealerships in search of the best deals.
- The important thing to remember is that the auto finance world treats term deposit borrowing as an overdraft tool. This is not a tech loan. This is because the money in the fixed deposit belongs to the borrower. He simply uses it as collateral for the lender to pay the borrowed amount.
- What makes car loans so attractive to car buyers compared to term deposits is that interest rates are typically 2% to 3% lower than conventional car loans. It is therefore not only about the money to be borrowed, but also at a lower interest rate than the normal product.
- Lenders usually do not extend the loan to the full fixed deposit amount. Usually the upper limit is 80-85%.
- Lenders generally do not charge any processing/miscellaneous fees for auto financing obtained in this situation. Also, if a person prepays the loan after a certain period, there is no additional fee.
- On top of that, in the case of a regular car loan, the lender owns the ownership of the vehicle. If the borrower defaults, the lender has every right to repossess the car to recoup the loan. In the case of deposit-based car finance, the borrower remains the sole owner of the car. He/she simply repays the borrowed money or deducts the money from the fixed deposit.
So, now you are aware from the auto loans from fixed deposits.