Fixed deposit rates are much more advantageous than other investments, as they offer a higher interest rate than a regular savings account. The capital in the fixed deposit cannot be withdrawn until the maturity date.
People usually prefer fixed deposits over other options because they are inclusive and independent of fluctuating market rates and stock indices, making them easier to monitor.
Being one of the most sought-after investment parkways, it is preferred by investors of all ages. Talking about today’s scenario, where stock markets have subsequently dropped, there has been no reduction in fixed deposits. In fact, it has soared by over Rs. 2.8 lakh crores, during the lockdown.
Reasons to Choose a Fixed Deposit
- One of the most popular stable forms of investment with fixed returns until the maturity period.
- Higher rates of interest when compared to other savings accounts or investing options.
- During emergencies, one doesn’t need to apply for a personal loan; instead, one can opt for a loan against a fixed deposit.
- It is adaptable; that is, one can deposit any amount over a term of 7 days to 10 years.
Most people prefer to invest based on fixed deposit interest rates. The interest rates affect investment in the following ways:
- The savings are invested in a fixed deposit that earns interest at the pre-decided rate set by the issuer. Higher savings growth can be achieved by locking in at elevated interest rates.
Even if the issuer changes the rates, one continues to earn the previously agreed interest rate for the particular savings. It also remains unaffected by any change in the market rate. This stability also makes fixed deposits useful in broader financial planning and loan decisioning, as they provide a predictable basis for evaluating creditworthiness. For individuals or businesses looking to leverage their fixed deposits, a modern loan origination system can simplify loan applications against these deposits, streamlining approval, disbursement, and interest calculations.
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Factors that Affect the Fixed Deposit Rates
- The interest rates largely depend on the issuer and vary from one issuer to another. Generally, the interest rates offered by NBFCs and other firms are much higher than those offered by banks or post office FDs.
- For a few years, RBI has focused on increasing liquidity in the economy, thereby reducing the fixed deposit interest rates numerous times. This has brought repo rates down, exerting downward pressure.
- Interest rates also depend on the term for which the savings have been invested. A longer tenure leads to higher interest rates, whereas a shorter tenure leads to lower interest rates.
- The interest rate also varies according to the payouts. If the payout occurs during the maturity period, the interest rate is generally higher than in situations with periodic payouts, where it is likely to be lower.
- The issuer generally offers a higher interest rate on fixed deposits to senior citizens, their employees, and existing clients.
- Higher Fixed deposit interest rates are also offered on renewing deposits as a renewal bonus.
The average interest rate offered by financiers is 5-6%. However, certain firms, like Bajaj Finance Fixed Deposit, might offer lucrative interest rates of up to 7.60% for new customers and an exceptionally high rate of up to 7.70% for existing customers. They offer a higher interest rate for senior citizens, up to 7.85%. A 0.10% renewal bonus is also offered on the existing interest rate when deposits are renewed.
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Calculation of Fixed Deposits
A few firms, like Bajaj Finance, have introduced a new online feature, a fixed deposit interest calculator, that helps their clients calculate and analyze their investment plans in advance. Customers can easily access this by simply filling out a few details, such as payout terms, interest rates, and investment amount. After this, the applicable interest pops up on the screen within a few seconds.
With this calculator, one can easily estimate the monthly interest, maturity amount, maturity date, and tenure.
In addition to this, the clients get the opportunity to compare and contrast various firms in the market to find their best choice according to their requirements within a few minutes. One can choose a period of 12 to 60 months and receive interest payouts at maturity. Existing customers can invest online from home, and even new customers can easily access it.
