Bank deposits are the easiest way and a commonly preferred to save some funds in India. Fixed deposits are measured as a safer option as opposed to the stock market and mutual funds. Term deposits can be of two types: fixed deposits and recurring deposits.
FDs are a common investment option where you will devote all your funds at a single time. If you opt for recurring deposits, you will have to invest your funds regularly over a period of time.
Here is a 5-point Guide to Get a Better Understanding of Fixed Deposits:
Fixed Returns:
If you choose to go for a term deposit, your money will be kept with a particular financial institute for a preset amount of time. The financial institute will propose a fixed rate of interest for keeping your funds for a longer tenure. This is one of the reasons why fixed deposits are considered to be very safe. You get a profit on the investment in terms of interest, which is paid by the bank. Senior citizens get a better rate of interest comparatively. Fixed deposits offer around 10.25% as the rate of interest. If you opt for a recurring deposit, the banks will propose a lower rate of interest.
Term or the Loan:
Term deposits can be made for different time periods. Tenure is the time period during which the bank holds your funds. The tenure or the term of your fixed deposit is completely dependent on you. The term of the fixed deposit can range from 7 days to 10 years.
Interest Payout:
Another feature that you can decide upon is the payment of your interest. You can do this only at the end when your deposit is matured. If you do not want this, you can choose to receive interest payments at regular intervals of quarterly, half-yearly or annually. A few financial institutions also propose a choice to reinvest the interest payments that you receive.
Breaking a Deposit:
The important thing to remember about fixed deposits is that once you invest the funds, you will not get to access these funds. If in case you want to get back your deposit amount, you will either be charged with a fine or the total payment of your interest will be decreased. Financial institutions also gives you permission to withdraw these funds once you have completed some part of the tenure. You need to make sure that you know about all these details before you invest your money. Best part of FD investment is that you can earn high rate of interest on fixed deposit schemes.
Overdraft Facility:
If you do not have any money in your bank account and you have an emergency, then you can also take a loan based on your fixed deposit. This is known as an overdraft facility. But there is a limit on the amount of money that can be drawn. In addition, you will also need to pay some interest. You will have to refer to your bank before you choose this facility.