Fixed deposits at banks are one of most convenient, safe and
hassle-free investment instruments that also provide reasonable returns. With the
advent of online banking these days, you can open FD online within few seconds and clicks. The tenures in fixed deposits are fixed and
usually provide higher return on higher duration. For example, a one-year
deposit might fetch 6% per annum return while a 5-year deposit might fetch 7%
per annum return depending upon the financial institution. Following are some
of the key things to know about fixed deposits:
1. The rate of return on fixed deposits is fixed.
Unlike other high-risk investments like stocks, mutual funds, and debt
funds, FD Interest rates aren’t
dependent on fluctuating market rates.
2. All banks provide flexible tenures to choose
from. You can open an FD account for as low as 6 months to a maximum of 5
years.
3. You can avail loan against your Fixed Deposits.
Some banks provide up to 90% of the total FD value as personal loan. Unlike
other unsecured personal loans, you get lower interest rates when you secure
your loan with your FD as collateral.
4. You can choose between cumulative and non-cumulative
options. In cumulative fixed deposit option, interest is accumulated over the
tenure of the FD and is paid only at the time of maturity. This helps you in
getting a lump-sum amount on maturity. You can use a simple FD Calculator to know the amount you will receive on
maturity. A non-cumulative FD works on the opposite principle. In these fixed
deposits, the interest payments are made to the investor in a periodical,
steady, and timely fashion. This makes it the most sought-after investment
option by retired investors, or those who seek frequent cash flow.
