Choose the Best Form of Fixed Deposit to Fetch Maximum Returns

Investments are always a major help in tackling the inexplicable changes that we may come across in life. We all might offer up a number of excuses why we don’t save at the moment, but it is very important to start investing early in life. The secure feeling that a good investment gives us is incomparable.

If you are planning on making a windfall windfall, then a term deposit would be the most ideal avenue.

What is a Term Deposit?

A term deposit as the name suggests, is a type of deposit in which the deposit is made for a certain time period. It cannot be withdrawn before the completion of the term, except under a few circumstances. The time period  can range anywhere between a month to a few years.

These deposits are usually offered by banks, NBFCs and some financial houses.

Types of term deposits.

There are different type of term deposits for you make an appropriate choice based on your needs.

Some of the examples would be Fixed Deposit (FD) account and a recurring deposit (RD) account.

Both have some distinct features, because of which they are starkly different from each other other on a lot of aspects.

Now the question of which is better arises while you’re looking to make an investment.

A Fixed Deposit, especially a short-term Fixed Deposit is the option you should prefer over a recurring deposit account. The interest rates on FD are usually better.

A short-term Fixed Deposit is the type of deposit which operates for a period of one year and not more.

Now let us learn about some of the benefits of a short-term Fixed Deposit.

Benefits of Short-Term Fixed Deposit over a Recurring Deposit:

  • No Monthly Remainder: Short-term Fixed Deposits don’t have put you under fix every month to make your payments as opposed to RD. A certain sum has to be deposited every month in case of a RD, thereby adding burden to your purse.
  • Earn Better Returns: Short term Fixed Deposits provide better returns than a recurring deposit eventually at the end of the maturity period.

Short-Term Deposit Offers Better Returns – Why?

The most significant difference between a short-term Fixed Deposit and a recurring deposit is the way in which the interest is computed.

The interest is compounded on the initial huge sum of money deposited in case of short-term Fixed Deposits.

But with recurring deposits, the interest is calculated is on the based on the regular addition you make at intervals or installments. As in the first installment earns interest for all 12 months, second for 11 months, third for 10 months and so on.

This difference can explained better with an example.

Let us say the amount invested is 24000 (lump sum) in case of a short term Fixed Deposit and the same with 2000 per month in case of a RD account.

If the rate is assumed to be 9% to both the accounts, then we will end up getting Rs 2234 in a short term Fixed Deposit and Rs 1195 in case of a RD account.

With short term Fixed Deposits, it is also possible to calculate the amount of interest that we will eventually receive. This feature will be greatly helpful in avoiding the taxes.

A tax saving term deposit will ideally avoid the problem of TDS, by enusuring that the interest received will not exceed the stipulated amount.

By now, it is clear that a short term Fixed Deposit definitely earns more than a recurring deposit.

If you are wondering about how to calculate FD interest, then Bajaj FInserv is there to help you with this.

Bajaj Finserv, a leading financial services company in India has the option of a FD calculator in days on its website portal.  Calculate the amount that you might fetch on the FD interest rates with this.

It will be of immense use, before you go ahead with your investment plan. We are sure that the information given so far will be mighty helpful in making your investments. Go ahead, choose to be informed and make the right decision.

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