How to Calculate FD Interest Rate Online?

Save & Invest

There are many ways in which people save money. Most people nowadays have a savings or current account in a bank. The aim is to save money and earn interest so that you can live comfortably in the future. 

But savings and current accounts do not give a lot of interest on your money. This is why people tend to open fixed deposit accounts. This type of account carries a higher rate of interest. To make sure you’re choosing the right fixed deposit, you must use an FD calculator.

Before we dive into how an FD interest calculator works, you should learn more about what an FD is and why people open a fixed deposit.

What is an FD (Fixed Deposit)?

A fixed deposit is a financial instrument similar to a savings account or current account. It is provided by banks and NBFCs (non-banking financial companies) to their customers.

A fixed deposit account is a type of investment that helps you save money and earn more interest on your money than regular savings or current accounts. 

The length of time a fixed deposit holds your money varies depending on the provider.You can choose the right fixed deposit for your goals based on this and the rate of interest it offers. 

You can use the FD calculator formula given below to make the best decision for yourself.

FD Interest Calculator 

Choosing the right FD can be a headache. To make things simple, you can use an online FD interest calculator. You can also use the formula given below to calculate different options yourself.

Formula to calculate FD

Total amount earned = P + (P x R x T/100)

In the formula above,

P = The principal amount that you deposit when an FD is created.

R = The rate of interest

T = The tenure/the duration of the fixed deposit

If you want to calculate compound interest on your FD, then use the following formula:

Total amount earned = P + P{(1 + i/100)T-1}

In the formula above,

P = The principal amount that you deposit when an FD is created.

i = The rate of interest per period

T = The tenure/the duration of the fixed deposit

Why Do People Open Fixed Deposits?

Here are some of the main reasons people create a fixed deposit.

  1. Better rate of interestIn general, most savings and current accounts only give anywhere from 4–5% interest. This is not a lot of money that can be earned from your savings. A fixed deposit, on the other hand, provides a higher interest rate, ranging anywhere from 6–15% in general.  
  2. Guaranteed ReturnsMost forms of investment are extremely volatile. They may or may not give you returns or dividends as promised. But a fixed deposit guarantees that you get the amount based on the rate of interest and tenure period as promised when you first open the account.  
  3. Flexible Tenure
    A fixed deposit must be held from the start to the end without withdrawing any money to get the rate of interest that was promised. But the aspect of flexibility comes in as you get to choose the period for which you want to hold the fixed deposit. Many institutions offer fixed deposits for durations as short as 7 days and as long as 10 years.  
  4. Loans against an FDA great thing about an FD is that if you are in urgent need of money, you can take a loan against it rather than breaking the fixed deposit prematurely. This allows you to continue holding onto your money while still addressing emergency needs. 
  5. Higher ROIThe longer you hold money in a fixed deposit, the more you earn. This happens because the interest that you earn on the principal amount compounds each year. This gives you a higher return on your investment as compared to a savings account and many other types of investments that are volatile.

Factors to Consider When Choosing the Right Fixed Deposit

To choose the perfect fixed deposit for yourself, you should consider the factors listed below and then use an FD calculator to make the best decision.

  1. Rate of Interest
    The rate of interest is a major factor when choosing a fixed deposit. The higher the rate of interest is, the better it is. If the institution you choose is offering an interest rate on a fixed deposit that is much higher than its competitors’, do your research and try to find out why this is the case.  
  2. Frequency of CompoundingThe second factor you should remember when choosing a fixed deposit is how often it provides interest on the amount you have deposited. One FD may pay interest once a year, while another may pay interest twice a year, once every six months.
    For example, let’s say you invested Rs. 100 in 2 different fixed deposits:
    FD-A has an interest rate of 8%, a tenure of 1 year, and provides interest only once a year.FD-B has an interest rate of 6%, a tenure of 1 year, and provides interest twice a year.
    At the end of one year, FD-A will give you Rs. 108.And at the end of one year, FD-B will give you Rs. 112.36.So even though FD-A had a higher rate of interest, FD-B gave a better return because it had a higher frequency of compounding. 
  3. Credit RatingYou should make sure that the institution with which you are creating your FD has an “AAA” credit rating. This will ensure that your money is safe in the right hands. 
  4. Terms of WithdrawalYou should always check the terms of withdrawal from an FD. In cases of emergencies, how fast you can withdraw your money and the penalty you pay are part of the premature withdrawal conditions. Some institutions may charge a lower rate of interest as a penalty for premature withdrawal. 
  5. Trusted Brand NameAlongside a AAA credit rating, you should always choose a well-established brand name that has been operating for years to ensure the safety of your money and the best returns.

Piramal Group is one of India’s leading companies and has been operating since 1980. With over 1 million customers across the country and 40+ years of experience, you can find some of the best financial services atPiramal Finance.