Things to Consider When Choosing a Fixed Deposit Scheme

When planning for your financial goals, it is important to align them with a strong financial plan. To help meet these goals, you can invest your savings in reliable and rewarding avenues such as Fixed Deposits (FDs).

FDs, or term deposits, are a crucial component of any well-balanced portfolio. They are secure investment instruments that offer guaranteed returns.

In this scheme, you deposit a certain sum of money for a fixed time period at a pre-determined rate of interest. The timeline for this could range from a few weeks to a few years.

If you are looking to find the best FD scheme, and get the maximum returns out of your investment, here are a few things you need to keep in mind.

Interest rate:

Different lenders offer different fixed deposit interest rates Before investing in a fixed deposit, it would be wise to scout for the best interest rate available in the market.

Tenure:

The tenure on an FD ranges from 7 days to 10 years. Generally, the interest rate you are offered will depend on the term you choose. As such, longer deposits are likely to earn a higher rate of interest. To estimate your returns more accurately, you can use an FD calculator.

Lender’s credibility:

Before finalising your FD details, it is important to verify the lender’s credibility and standing. Agencies such as India Ratings & Research (Ind-Ra), Credit Rating Information Services of India Limited (CRISIL), Credit Rating Agency of India Limited (ICRA) and Credit Analysis and Research and Investment (CARE) provide a reliable reading of the lender’s credit rating.

Payouts:

Depending on whether you want periodic returns or interest at maturity, you can opt between cumulative and non-cumulative FDs. In non-cumulative FDs, payouts can be made on a monthly, quarterly, semi-annual or even annual basis. In cumulative FDs, the interest is compounded and a payout is made at maturity, on completion of the tenure. As such, these FDs offer you higher interest payouts.

Early exit charges:

Fixed deposits come with a lock-in period, which means you cannot withdraw the money prematurely, before the term ends. However, if you do so, there could be a penalty to pay. While choosing an FD, find out the price you may have to pay for its early liquidation.

Senior citizen benefit:

Senior citizens FD usually receive better rates of interest. Usually, the interest rate offered to them is 1% more than usual. If you’re a senior citizen, you should find an FD that offers you the best rate.

Simple process:

Lastly, when selecting a lender, ensure their application process matches your preferences. Nowadays, people generally prefer a simple online process, with minimal steps and documentation.

With assured returns and zero volatility,  FDs have become attractive investment avenues for investors. When looking for the best fixed deposit schemesin the market, it is important that you keep the aforementioned points in mind.

By making the most out of your investments, you can plan a worry-free future for the family.