Finance

Benefits of Investing in a Fixed Deposit

Benefits of Investing in a Fixed Deposit
Written by Hina Williams

Fixed Deposit (FD) is one of the most preferred and flexible investment options available to customers as it has been tried and tested for a significant period of time. It is a financial instrument provided to individuals by banks and Non Banking Financial Companies (NBFCs) that offers higher rate of interest when compared to a regular savings account. It is considered a safe investment option given that an individual can start investing from as small as Rs.1000 for a minimum duration of 7 days as well as for the minimal risks associated with it.

If you intend to invest in fixed deposits, you can first check out the interest rates offered on various tenures by different banks that operate in the country on the Bankbazaar App. The app helps you in knowing all the latest rates offered by various banks prior to deciding with which bank the fixed deposit account is to be opened, so that it enables you can earn the best returns on the investment made.

In this article, we take a look at some of the benefits that an individual can avail if he/she starts investing in Fixed Deposits (FDs):

  • Guaranteed Returns: When an individual starts investing in a Fixed Deposit (FD), he/she can be assured of getting guaranteed returns. These is because when it comes to FDs market fluctuations does not impact the returns on the investment made. Unlike mutual funds, debt funds and others, FDs help investors earn interest on the investment made as per the prevailing interest rate when the money was invested.
  • Easy to Invest in FDs: A Fixed Deposit account can be opened very easily and does not involve much hassle. The FD account can be opened by the individual using online mode or through offline mode which involves the investor to visit the bank branch.
  • Free to select the Tenure: Fixed Deposit comes with flexible tenures, which is a big benefit. With banks offering tenure that ranges from 7 days and 10 years, investors can select a tenure based ¬†on their requirements.
  • Higher Interest Rates: Fixed Deposits offer good interest rates as compared to other investment instruments. The rate of interest offered by banks and financial institutions on FDs can go up 11 percent which is raised even higher when a fixed deposit account is opened by senior citizens.
  • Can avail Loan and Credit Card against Fixed Deposit: Starting to invest in a fixed deposit account can help an individual in availing a loan or a credit card. If an individual avails a loan against a fixed deposit, he/she is eligible to avail a loan up to 90 percent of the principal amount that was deposited. As for credit card, the individual is able to avail around 80 to 90 percent of the deposited amount as the credit limit on the card. Moreover, it saves the individual from submitting documents of ¬†income proof at the time of applying for the credit card.
  • Helpful in Cash Crunch Situations: As and when the individual is faced with a cash crunch situation, the fixed deposit can be ended pre-maturely. This helps the individual in cutting down on availing loans from financial institutions at a higher interest rate. If the fixed deposit is broken pre-maturely, individuals only need to pay a minimal amount as penalty which is far better than availing a loan when the individual faces cash crunch situations.
  • Can open multiple FDs at the same time: Another benefit when it comes to investing in fixed deposits is that an individual can open multiple FDs at the same time with the same bank or different ones. This enables individuals to earn good returns for each investment made in fixed deposits as the interest rates offered vary from bank to bank.
  • Can open Joint Fixed Deposits: Fixed Deposits can be opened jointly, be it with the parents, spouse or children. This can be considered as a benefit because it helps it opening an FD account with a higher investment as well as remove the hassle of remembering multiple maturity dates.

Given the multiple benefits that comes with investing in fixed deposits, it is no wonder that individuals prefer fixed deposits to all other investment modes that are available. So, if you looking to avail good returns on the investments made without involving too much risk, start to invest in FDs in the best way forward.

About the author

Hina Williams

A Financial Advisor and Blogger for more than 5 years. Love sharing all the latest news and tips!

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