Term deposits are one of India’s most sought-after investment programs, also known as fixed deposits. So, millions of Indians opt to invest their life savings in a term deposit program. Before picking any term deposit program, an investor needs to know about the sorts of fixed deposits schemes and the variables to bear in mind.
Finding the correct fixed deposits program is vital to achieving the maximum returns on your deposited money. But you can pick the most acceptable fixed deposits plan if you are aware of critical variables before registering for a term deposit. Further, you may learn about every facet of fixed deposit plans.
Fixed deposits are low-risk investment choices through which customers may obtain more significant returns than putting their money in a conventional savings account. The term deposit interest rates generated in online fixed deposit amounts continue to accrue at periodic intervals. The interest rate offered on fixed deposits differs from one financial institution to another. Most fixed deposit plans come with a lock-in period during which the investor cannot make withdrawals.
Here are the Critical Aspects of Fixed Deposits:
- It is a secure investment opportunity
- If It helps you earn excellent income over a defined time
- It comes with a variable tenor option
- There is no restriction on the maximum investment amount in a fixed deposit program
- Senior citizen savings plans feature preferential term deposit interest rates
What are the various kinds of fixed deposit schemes?
Standard Fixed Deposit Plan
Almost every bank provides typically fixed deposit programs to its clients. When investing in this program, you have to lock the money throughout a defined term ranging from 7 days to 10 years. The most significant thing is the term deposit interest rates are larger than the interest obtained on money placed in the typical savings account. The interest rate given in a basic fixed deposit program differs from one financial institution.
There are essentially two kinds of conventional fixed deposit plans:
Cumulative Scheme
In a cumulative fixed deposit program, the interest is due on maturity.
Non-cumulative Scheme
Here, the interest is credited to your account weekly, quarterly, monthly, or yearly, based on the investor’s choice. One also must remember that the interest earned is taxed if you pick the non-cumulative option.
Tax-saving Fixed Deposit Scheme
The tax-saving fixed deposit is the best-secured FD scheme for seeking tax-exemptions under Section 80C of the Income Tax Act. The tax-saving fixed deposit comes with a set lock-in duration of 5 years. By investing in this fixed deposit program, one may obtain Rs a yearly tax exemption. 1.5 Lakh. The interest rate given in tax-saver FDs now fluctuates from 5% p.a. to 6% p.a.
Senior Citizen Fixed Deposit Scheme
The senior citizen fixed deposit program is a term plan with preferential interest rates. The interest rate given in this program is 0.50% p.a. greater. If you are over 60 years, you might pick a senior citizen fixed deposit program. It comes with the feature of a regular pay-out option where you may make a consistent and continuous income to deal with your daily financial necessities. A senior person may also avail a loan against the Senior Citizen Saving Scheme (SCSS) during financial difficulties. The interest rate given in SCSS fluctuates from 5.50% p.a. to 7.05% p.a. for a maximum term of 5 years.
Corporate Fixed Deposits
The company fixed deposits are a popular alternative for investors. The fixed deposit interest given is more significant than that offered by banks and NBFCs. With the increased interest rate, the danger is also more enormous. Always invest after looking over ICRA credit ratings fixed deposits. It assists in evaluating the risk percentage of investing in any corporate fixed deposits.
Here are the ways to find the most acceptable saving plans
Interest rate: One of the most significant variables is to help you pick a suitable fixed deposit program. Always compare the interest rates given by different banks, NBFCs, and corporates.
Credibility: Apart from examining interest rates, it is also vital to evaluate the market positions of the FD provider. Don’t consider simply interest rate as a criterion to making the selection. Always pick the A-rated FD program of a corporation, bank or NBFC.
Tenor: After considering the two variables mentioned above, examine the lock-in duration and confirm if it fits your lock-in term.
Interest pay-out option: There are broad alternatives for acquiring interest pay-out options. It is necessary to verify the interest-pay-out mechanism of any FD investment program.
Compare the Interest Rates
Term deposit interest rates vary across banks, government schemes and other financial institutions. In the past few months, the interest rates on banks, post office FDs and other government saving schemes have shown a downward interest rate trend in the past quarters. However, company FD offered by Bajaj Finance still offer a high interest rate up to 7.35%, which is among the best across all term deposit issuers in 2020.
It is always advisable to compare the returns on term deposits using a reliable online FD calculator such as that available on Bajaj Finance website. You can also use the post office fixed deposit calculator for calculating post office FD rates. The comparison will give you exact interest payout and investment value to help you make the right term deposit investment decision.
Choose Safety with High Returns
Along with high returns, the term deposit should also ensure the safety of your investment. There are very few FD issuers that offer the best of both worlds – returns and safety. For instance, Bajaj Finance term deposit not only offers returns exceeding 7% but also accredited for the highest stability ratings by ICRA and CRISIL. This makes it the safest term deposit for investors.
Check for Online Access
You should be able to access and operate the term deposit online anytime from anywhere in the world. You can open Bajaj Finance term deposit online in a few minutes on its website through a simple, quick and paperless process. There are also other benefits associated with Bajaj Finance online FD.
Value-Added Features
A good term deposit is one which enables you to maximize the returns through different features. In the case of Bajaj Finance, you can grow your returns in two ways:
- Multi-Deposit Facility: This feature allows you to invest in multiple FDs of smaller amounts with varying tenor and interest payment frequencies instead of blocking lumpsum money for a fixed period. As and when you face liquidity crunch or need money for short-term goals, you can break a single deposit and let the other deposits remain invested to earn returns.
- Systematic Deposit Plan (SDP):
It is a common trend of depositing a small part of your income in a savings account every month. However, you can even invest that small amount in Systematic Deposit Plan from Bajaj Finance. This plan offers the flexibility of choosing the number of monthly deposits and the tenor for each deposit.
You can make 6 to 48 small, standalone deposits every month for 12 to 60 months tenor under the Monthly Maturity Scheme of SDP and between 6 to 36 deposits under the Single Maturity Scheme of SDP. The interest rate prevailing on the date of making the deposit will apply to that particular deposit. The longer you stay invested, the more returns you can expect with the power of compounding.
Re-investing Your Returns
You can invest in multiple FD schemes using the multi-deposit feature and club their returns in a cumulative FD of a longer tenor. This will help you to compound your returns and you will be able to accumulate a big corpus until retirement.