5 Benefits of Investing in Fixed Deposits

Fixed deposits are one of the most popular financial instruments in India. Offered by banks and NBFCs, Fixed deposits (FD) give investors a higher interest rate than other regular savings account, until a fixed maturity date. FDs are widely considered as the safest option for investments, and to grow your capital steadily. Let’s have a look at their exciting benefits:

• Guaranteed returns: The return you get on the money accumulated in your FD is guaranteed. You keep earning money at the fixed interest rate, no matter the economic situation of the country. Fluctuations in the market also do not impact your FD investment.
 
• Higher interest rate: This is the reason why FDs are so much more preferred than normal savings account. The interest rates may depend on the banks, but you can calculate the amount of return on your investment through an online FD calculator. One thing to remember is that the interest rates change as per the duration of your term. Usually, the longer the term, the higher the rate. 

• Loan facilities: In an emergency where you need a big amount as fast as possible, you can take a loan against your FD. This way, you can borrow up to 90% of the principal amount of the fixed deposit, while still earning interest. This interest can help you repay your loan much more easily.

• Emergency cash: In a cash crunch, you can break your FD with your bank and withdraw the money. If it’s a premature withdrawal, there will be a nominal charge by the bank. However, it is advisable to opt for a loan against your FD than prematurely breaking it. The interest earned on the FD reduces the interest outgo on the loan. Additionally, you won’t have to pay any extra charges or penalties.

• Risk management: Investing in other instruments such as ULIPs, Mutual funds or stock are risky as these are volatile tools. Having FDs in your portfolio minimizes that risk as you have steady savings at a fixed interest rate. A great benefit for long-term financial plans.