In India, the most common investment option is a fixed deposit. People typically invest in FDs to achieve financial goals such as the construction of a house, purchase of a car, weddings, further education, and so on.
A Fixed deposit can also assist you in effectively planning your retirement. Investors must, however, consider a few aspects before opening an FD account to maximize their earnings.
FD duration
The interest rate and the length of a fixed deposit are inextricably related. For example, the return on a ten-year fixed deposit is always higher than the return on a one-year FD. You can use FDs for a variety of financial goals, including short-term (1-3 years), medium-term (3-5 years), and long-term (5-10 years).
Rating
CRISIL and CARE are credit rating companies that issue ratings to financial institutions based on several factors. CRISIL FAA+ or CARE AA-rated financial institutions are regarded as the best. As a result, to reduce your risks, verify the credit rating of the financial institution.
Interest Rate
FD interest rates are now hovering around 6.70 %, with elderly individuals receiving a 0.25 % premium. Rates of interest can be cumulative or non-cumulative. Amounts invested in the cumulative mode are locked until maturity with accrued interest and principal credited at the end of the term.
You can earn a fixed interest amount every month, quarter, half-yearly, or annually in a non-cumulative manner. Choosing the right FD to open will maximize your returns.
Loan Facility
People typically request loans when they have an immediate financial need. When you open a savings account, though, you automatically become eligible to take out a loan against it.
These loans allow you to withdraw up to 75 percent of your investment at a 2% higher interest rate than the best (highest) FD interest rates currently available. The loan term is identical to the FD period in this scenario. As a result, if you choose to invest in a 10-year FD in the second year and apply for a loan, you will have eight years to repay the loan.
Financial institution
Not all financial institutions offer excellent FDs. Before opening an FD account, research the financial institution’s characteristics and value-added services. Evaluate these characteristics if you want to receive the best return on your investment.
Time is money in the investment world. Furthermore, by investing in a fixed-income product that pays less than 6.7 percent now, you risk missing out on the opportunity to intelligently increase your money.
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