If you’ve recently inherited a lump sum, or received a large bonus at work, or simply have idle funds, a fixed deposit may be a smart choice of investment. With a flexible tenure period of your choice, you can invest the amount and obtain high and guaranteed returns with a rate of interest that allows a minimal risk factor.
Depending on your salary and financial commitments, you can choose the rate of interest, tenure period, and also the period of return on your fixed deposit. You could take the help of a fixed deposit maturity & interest calculator to choose the best option for you.
Apart from benefits like high returns on investment, flexible tenure schemes, and a low risk factor, there are certain hidden features of fixed deposit that most people aren’t aware of.
5 Hidden Features of Fixed Deposit
1. Floating Rate of Interest
While most banks and NBFCs offer a predetermined rate of interest that is mostly fixed throughout your tenure period, there are some financial institutions that do offer a floating rate of interest.
If you are willing to take up some amount of risk, this may be a good option for your investment. The floating rates are usually declared once every quarter throughout the year.
With the fluctuating rates of interest, you may want to keep a fixed deposit interest calculator at hand.
2. Insurance
Your investment comes with an insurance of up to Rs. 1 lakh. If your principal is a large amount and you feel the need for a higher amount of insurance, you can split your funds across several accounts with multiple banks and gain a particular amount of insurance on each of your fixed deposits.
Some banks and NBFCs offer an insurance not only against your investment, but also against your health or in case of an accidental death.
3. Personal Loan Against Fixed Deposit
In times of a financial crisis, you probably would consider an early withdrawal of your fixed deposit, which not only leads to alterations in your goals, but also deducts a penalty from your interest.
A more convenient option would be to apply for a loan against the fixed deposits. You will be entitled to a much lower rate of interest, and can demand a loan of up to almost 90% of the principal amount.
You will also have other benefits like instant approval, immediate crediting of the loan amount, and pre-payment facilities.
4. Integrated FDs
A common practice in our country is to have several FD accounts for individual goals in your life. Be it savings for your wedding, the education of your child, or buying your dream home, you probably have assigned an FD account for each of these goals.
While the investment is practical and rewarding, it would require loads of paperwork to follow up with.
You can avoid this tedious task by opting for a more convenient option provided by financial institutions. You can invest all your amount into a bulk fixed deposit, and divide the amount into denominations of your choice for each goal.
5. Reinvesting Your Interest
If your monthly interest is just idle cash in your account, you can reinvest this amount into your fixed deposit. This would also increase the returns on your investment in the long run. You can use a Fixed Deposit calculator to verify and reset your long-term goals.
Before investing in a fixed deposit, it’s important to do your research, know the schemes offered by banks and NBFCs, and decide on the best bet. You may also want to keep in mind your monthly income, budget, and other financial commitments that you have.
Author: Nitin Arora
