FindItMore | Fixed deposits are an option that can add a good amount of safety to your portfolio and reduce your risk. However, before you select an FD, it is important to be more aware of what they offer you. This will give you a clear picture about the investment option and help you make all the right decisions.
Apart from this, use an FD calculator so that you can apply your chosen issuer’s FD interest rates and compute your earnings at maturity in advance. Here are 6 things for you to know before you invest in an FD.
You can choose NBFCs for a higher rate of interest
When it comes to investing in a fixed deposit, it is always good to be cautious about the issuer you choose. Compare banks and NBFC offerings based on the interest rate they offer on FDs. Fixed deposits by NBFCs offer higher rates of interest than banks.
Getting 7-8% on your investment is easy when you compare and choose the best issuer in this regard. Furthermore, FD is known to be an ideal investment option for a retired person as senior citizen FDs fetches at least 0.35% higher rate of interest on your investment.
You can choose the most suitable interest payout
Fixed deposits give you access to interest payouts in two ways via the two FD variants: non-cumulative and cumulative. While cumulative FDs allow you to access interest returns only on maturity, non-cumulative FDs allows you to gain from regular interest payouts.
Hence, it is important to select the type of interest payout you want based on your financial preferences. For instance, non-cumulative fixed deposits are ideal if you want to pay your monthly bills with your interest earnings or when you want to take care of your regular expenses post retirement.
You can compare FDs based on safety ratings
Fixed deposit offerings by financial institutions, banks, and NBFCs feature a safety rating. These ratings, given by many credit rating agencies in India, measure the overall credibility of the issuer.
CRISIL is one such notable credit rating agency and marks FDs on a scale of FAAA to FD. Apart from choosing an FD based on its interest rate, it is also important to choose one that has a higher rating. This increases the safety quotient on your FD and guarantees a trustworthy return on your investment.
You can put the returns to good use
You can use your FDs to fund an array of short-term and long-term needs. One of the most common uses of a short-term FD is to finance the purchase of an asset such as the down payment on a car or a home. You can use your earnings from a non-cumulative FD to take care of monthly expenses for your child or yourself after retirement.
You can also save money via a cumulative FD to put your savings in a safe avenue and lock away an amount to bring more discipline to your spending behavior. Further, you can use it to finance an international vacation or even your child’s education.
You can gain returns that are market-independent
The interest returns on your FDs are completely independent of market fluctuations. This means that you will receive assured returns on maturity for your investment, irrespective of the economic scenario. This assurance parks your investment is safety and keeps it secured against the adversities of the market.
Not only do you get assured returns on the principal, but the interest offering promised on it also does not alter over time. This way you can calculate your earnings in advance and count on the money in the future.
You may have to pay for premature withdrawals
The premature withdrawal rules of the FD vary across financial institutions. However, in many cases you may have to pay a significant amount of penalty for premature withdrawal. These can affect the overall interest calculation of your FD and thereby give you a lower maturity amount as compared to what you expected. So, ensure you know it in advance and only liquidate your FD before maturity when it is essential.
Now that you know the benefits of fixed deposits, invest in a good FD to get the best yields. The NBFCS FD offers you various benefits like attractive rate of interest, flexible tenor and guaranteed returns with an interest rate of up to 8.75%.