How Do Fixed Deposits Work?

fixed deposit rate

Life can throw curveballs at you when you least expect it to, making it the reason why people save for the future. Why run for borrowing money when emergencies come to your door when you can efficiently save for the future with timely investment in yourself.

Fixed Deposits (FDs) are financial investment options that allow you to deposit a specific amount of money for a fixed term and earn interest on this amount. FDs are commonly used as a safe investment because they are risk-free methods to increase your wealth.

If you like to make money by merely putting your surplus funds aside for a fixed term, fixed deposits are the right choice of investment for you. This is how they work: 

Understanding the Basics

Understanding Fixed Deposits is not rocket science. You can start your own FD account by depositing a specific amount of funds to a fixed deposit account with a Bank or a Non-Banking Financial Company (NBFC).

You are required to decide a tenure on the deposit according to your requirement, and you will receive the funds along with interest as income after the tenor of the deposit. Moreover, NBFCs provide a higher rate of interest than as compared to banks, since FD interest rates in banks are controlled directly by RBI and NBFCs self-regulate their interest rates.

Longer Tenor, Better Returns

The most important benefit from fixed deposits can be availed by investing in FDs for a long term. FDs are incredibly flexible as you can keep the amount deposited for a tenure of 7 days to 10 years. The most advantageous features about fixed deposits are that they are guaranteed investments that bear definite fruits regardless of market fluctuations.

Moreover, despite the possibility of a decrease in interest rates, your returns will be based on the existent rate when you deposited your funds in the FD. However, fixed deposits can be withdrawn if you require them for some immediate expenses, but in that case, you would just get limited interest income as per the criteria that may differ from one financial institution to another financial institution.

If you invest an amount of 5 lakhs for 5 years, you can earn an interest amount of up to 2,48,370 with the cumulative interest rate of 8.40%. Alternatively, if you will receive an income of 2,10,000 if you opt for a non-cumulative interest rate for your FD.

Cumulative interest option provides higher returns as your deposit amount is re-invested annually along with the interest income of the earlier years till the date of maturity. Accordingly, if the principal amount and tenure of your FD increases, you are bound to receive higher returns on your fixed deposit.

Keeping Your Future Secured

Fixed Deposit Schemes help you secure your child’s education, manage your future home renovation, and can also make you self-sufficient after retirement. If saving money is not your strong point, you can efficiently make various smaller FDs to handle your future necessities and upcoming purchases without borrowing loans.

Bajaj Finserv also provides pre-approved offers on loans, cards, and EMI Network. All you have to do is share your basic details, request an OTP and check your pre-approved offer.

Get Higher Returns with Bajaj Finance

Your future needs should be second to none. We at Bajaj Finance have taken your requirements into account and designed the best fixed-deposit plans for you. FD interest rates by Bajaj Finance are capped at 8.40%, which is much higher than that are offered by most banks who provide an FD interest rate of up to 7.25%.

Moreover, you can also tap into the benefit of managing separately fixed deposits with different FD interest rates to handle your returns in the best possible way. Additionally, you can also avail periodic interest pay-outs on specific timings to spare funds for your future expenses. You can efficiently calculate your future returns with the Fixed Deposits Calculator by Bajaj Finance.

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