Why Choose FD Instead of Any Other Investment Option?

The uncertain times that we live in call for investments which can safeguard us against any unforeseen financial emergencies that we might stumble upon. Although there are numerous investment options for you to choose from, it is imperative that you opt for the one that caters to your financial needs.

Fixed deposits, also widely known as FDs, are among the most popular forms of investments. Be it, youngsters or senior citizens, everyone these days is opting for fixed deposits, and here's why:

Safe form of investment

Fixed deposits are risk-averse and hence a safe investment option. Fluctuations in the market do not affect your invested amount since FDs are not market-linked. You do not need to keep a close eye on market conditions and can rest assured that your money is safe and intact. Your interest rates will remain, unaffected and you will receive your interest returns as per the decided conditions.

Low deposit amount

For a fixed deposit, you do not need to invest a large sum of money. Most banks allow you to invest in an FD at a deposit amount as minimal as ₹5,000. This indicates that anyone can save through an FD without having to invest a huge amount.

Tenor as per preference

Fixed deposits offer you the liberty to pick a tenor of your choice. Based on your short-term or long-term financial goals, you can pick a tenor that suits you. You can opt for an FD tenor of as less as 7 days. Furthermore, the maximum tenor of an FD is 10 years.

Higher interest rates

Fixed deposits have a higher rate of interest when compared to savings accounts. Moreover, the interest rates offered by NBFCs are generally higher than that of Bank FDs. For instance, the PNB housing finance FD rates are as high as 7.65%. Most fixed deposits also provide a 0.25% increase in their senior citizen FD interest rates.

Assured returns

FDs ensure capital security which indicates that the amount you invested will be returned to you at the end of your chosen tenor in its entirety while you also receive your earned interest as per your preferred payout frequency.

Flexible interest payout frequency

Fixed deposits let you choose a payout frequency that is tailored to suit your monetary needs. There are two major categories of FDs, namely the Cumulative fixed deposits and the Non-cumulative fixed deposits. Through a Cumulative fixed deposit, you can receive the total amount, inclusive of your initial deposit and the interest earned, at the time of maturity. Whereas, in the case of a Non-cumulative FD you have the option to customise your interest rate payouts as per your preference, be it every month, quarter, 6 months or every year.

FD Calculator

Most financial institutions provide a fixed deposit calculator on their portals to help you plan your investment efficiently. Through the FD calculator, you can calculate your returns using various deposit amounts to help you get a better idea of how much you should invest to get the returns you desire. This will help you plan your investments better and make the most of them. Additionally, the fixed deposit calculator can be used as many times as you wish without costing you a single penny.

Premature withdrawal option

In the event of a financial emergency, fixed deposits give you the option to withdraw some of your deposited amounts prematurely instead of completely closing an FD and having to pay the penalty. This offers you a sense of liquidity in terms of being able to reach your funds in times of need. You can prematurely withdraw up to 75% of the amount you deposited. Thus allowing you to utilise your funds without losing out on the benefit of earning higher interest returns.

Loan against FD

If there arises a financial crunch wherein you would need to acquire a loan but have nothing to pledge as collateral, you can get a loan against your fixed deposit. Most financial institutions let you pledge your FD and get a loan of up to 90% of the fixed deposit's amount. This can help you meet your immediate financial requirements.

Tax benefits

If you are looking to save up on your taxes, you can book a tax-saving FD. These fixed deposits are usually offered by banks and the post office. Through a tax-saving FD, you can get a deduction on your tax for up to ₹1,50,000. These fixed deposits will considerably reduce your tax liability.

Savings for retirement

Fixed deposits are a great way to save up for your retirement. This applies to both youngsters as well as senior citizens. As young adults, it is wise to inculcate the habit of investing to diversify your portfolio. As senior citizens, the regular interest acts as a source of income to meet your daily needs. Hence, an FD can help you secure your financial future.

Hassle-free process

Booking an FD no longer involves a tedious procedure. Most financial institutions offer online banking facilities through which you can invest in a fixed deposit without having to step out of your homes. You can easily avoid long queues by opting for an online procedure. You can make a fixed deposit investment, prematurely withdraw an FD, renew a fixed deposit, and even close an FD, all at your fingertips.

An FD is a wise investment choice for you if you are someone that wants to avert risks but at the same time earn stable returns. With a fixed deposit you are sure to receive assured returns as well as refrain from any risks that might come your way. FDs offer multiple benefits such as premature withdrawal, loan against fixed deposit, tax deductions, flexible tenors and interest payouts, ease of convenience and more which make it a great choice for you. Through investing in a fixed deposit, you can eventually accumulate enough funds to build a corpus and secure your retirement.