Fixed Deposits: Features and Benefits

Save & Invest

What do fixed deposits mean? Want to know more about fixed deposits and whether or not they are safe? Want to know what a fixed deposit is and what it can do for you?

A fixed deposit (FD) is a way for banks and non-banking financial companies (NBFCs) to help their customers save money. With an inactive deposit account, you can save much money at a fixed deposit interest rate for a set amount of time. At the end of the term, you get a lump sum plus interest, which is an excellent way to save money. Different banks offer fixed deposit accounts with varying rates of interest. You can choose a fixed deposit that lasts between 7 and 14 days or ten years.

Some people call fixed deposits “term deposits” because of this. When you open a fixed deposit account with a particular interest rate, that rate will never change, no matter what happens to the market. You can get your interest when the loan is paid off or regularly. You can only get the money out after the time is up.

Features of fixed deposits

To know a fixed deposit, you must know its most essential parts.

Here are the important ones:

  1. Guaranteed Returns: The return on a fixed deposit is always the same. You’ll get the same return rate promised when you open the fixed deposits. On the other hand, returns on market-led investments depend on how interest rates change. Even if interest rates go down, you will still get the agreed-upon amount of interest.
  2. Interest Rate: The interest rate on a fixed deposit depends on how long you keep it. But the rate of interest is always the same. You can find the current interest rates for fixed deposits by going to the online site.
  3. Gives you a choice of terms: With a fixed deposit, you can pick a time from 8 days to 10 years.
  4. Get your money back: The interest you earn on a fixed deposit depends on how long it takes for the deposit to mature, also called its tenure. More claim is made when the term is longer. Also, the return on your investment depends on whether you choose to get the interest regularly or reinvest it, which is called a cumulative fixed deposit. With these fixed deposits, you benefit from the money adding up. Using the fixed deposit calculator, you can figure out the interest on your fixed deposit. Loan against a fixed deposit: If you need money quickly, you can use your fixed deposit as collateral for a loan.

This keeps you from having to cash out your fixed deposits too soon.

Benefits of fixed deposit

  1. Interest rates: You can get more interest on your hard-earned money if you put it in a fixed deposit instead of a regular savings account. Most corporate fixed deposits have higher interest rates than most banks so you can make more money with them. With the Fixed Deposit Calculator, you can check the interest rates and figure out how much your money will be worth when it matures in minutes.
  2. Fixed deposits are one of the best ways to invest because you can get your money back. When you put your money in a fixed deposit, you get a guaranteed return because the fixed deposit interest rate doesn’t change with the market. This means that it doesn’t change the amount of your deposit.
  3. Tax Benefits: You can get tax breaks if you have a tax-saving fixed deposit with a 5-year lock-in period.
    Under Section 80C of the Income Tax Act of 1961, you can claim up to Rs. 1.5 lakhs from your fixed deposits.
    You can only get the money out of a tax-saving fixed deposit once the deposit is over.
  4. Loan Against Fixed Deposits: You don’t have to break your fixed deposits early if something goes wrong.
    Instead, you can use your fixed deposit as collateral for a loan and continue to earn interest on the deposit amount. Most banks and NBFCs won’t give you a loan if you put up more than 90% of your fixed deposits as collateral.
  5. Flexible Length: The only person who can decide how long a fixed deposit account will last is the person who has it. The answer depends on the bank or NBFC.
    Fixed deposits can be made for as little as seven days or as long as ten years.
  6. Only one time is needed to make an effort: when you put money into a fixed deposit, you know that your money is safe. You only need a lump sum of money to invest, and then you can watch your money grow for as long as you want.

Who can set up a fixed deposit?

Setting up a fixed deposit account is easy.

To apply for a fixed deposit, you need the following documents and to meet the following requirements:

  1. Check the minimum deposit amount at the bank or NBFC of your choice to see if you have enough money to apply for a fixed deposit.
  2. It would be best if you were born in India and lived there. People who live outside of India can also open non-resident external (NRE), and non-resident ordinary (NRO) fixed deposits.
  3. You must show proof of your identity, like a passport, Aadhaar card, PAN (personal account number) card, voter ID, or any other government-approved ID. You must also show proof of your address. To apply for a fixed deposit, you can bring in a phone bill, an electric bill, a bank statement with a check, or any other proof of your address.

 Summing up

This article aims to explain a fixed deposit, its features, and its benefits before putting money into a fixed deposit. You should know what you need to know about fixed deposits and the interest rate on fixed deposits. Fixed deposits are a great way to make money as an investor if you want to avoid taking risks. Because of a process called “compounding,” the returns get bigger over time. Investors can take some or all of their money early from FDs, so they are flexible. Pay attention to what has been said so far when making decisions. Think carefully about what you do.

Investment Reliable does not offer financial advice, but we provide unbiased information and evaluations on trading, investing, and finance. Users ought to always carry out their research. Also, visit Piramal Finance has more in-depth educational articles.