What are the Benefits of a Short-Term Fixed Deposit

A short-term fixed deposit (FD) is designed for individuals who prefer investing funds for a shorter tenure. It provides fixed returns for a defined period, subject to applicable product terms and conditions. Interest rates are determined at the time of booking and remain applicable for the selected tenure.

Fixed deposits are widely used savings instruments and may be categorised into short-term and long-term variants based on tenure. Short-term fixed deposits generally have tenures up to one year, depending on the financial institution’s product offerings.

Certain financial institutions may offer additional interest to eligible senior citizens or women depositors, subject to applicable terms and conditions. Investors may review the prevailing interest rate structure and use available calculation tools to estimate potential maturity value.

What is a Short-Term Fixed Deposit?

Banks and Non-Banking Financial Companies (NBFCs) provide a short-term fixed deposit. A short-term FD encourages people to deposit money and cultivate a good saving habit. An advantage of investing in a short-term fixed deposit is that you can get better interest rates than a regular savings account. The interest rates vary according to the financial institutions and can be revised at any time. However, these changes will not affect an ongoing fixed deposit as the interest is predetermined.

You can withdraw a short-term deposit easily before the maturity date. However, some financial institutions may charge a penalty for early withdrawal. Investors are advised to review withdrawal conditions before investing.

Features of a Short-Term Fixed Deposit

• The tenure of the short-term deposit is usually up to 12 months, depending on the institution.
• It is generally structured as a lump sum investment made for a defined tenure
• You can choose to renew the short-term fixed deposit once it matures but also have the option to use it to achieve your financial goals.
• The rate of return on a short-term deposit is better than that of a regular savings account.

Advantages of a Short-Term Fixed Deposit

• A short-term deposit is ideal for saving purposes like buying a new vehicle or a gift for a family member.
• Premature withdrawal may be permitted, subject to applicable terms, conditions, and penalties as defined by the financial institution.
• Loan facilities against a short-term fixed deposit may be available, subject to eligibility criteria and institutional policies. The sanctioned loan amount may be linked to a percentage of the deposit value.
• Interest rates on short-term fixed deposits are fixed at the time of booking for the selected tenure.

Eligibility for a Short-Term Fixed Deposit

The eligibility criteria of a short-term FD depend on the bank or NBFC you have chosen. Here are the details on eligibility and documentation that will be common across most banks or NBFCs:

• Applicants are generally required to meet minimum age criteria as specified by the institution.
• A minor may apply for an FD with their guardian as the caretaker of the account.
• The documents you will require to open an FD usually include Aadhaar Card, PAN (Permanent Account Number) Card or any other documents as your identity and address proof, as required by the financial institution.

Applicants should review the institution’s product terms and documentation requirements before applying.

Conclusion:

A short-term fixed deposit may form part of a broader financial plan, depending on liquidity needs and investment objectives. Loan facilities against fixed deposits may be available, subject to eligibility criteria and institutional policies. Interest rates, tenure options, and withdrawal conditions vary by institution and are subject to applicable terms and conditions.

With Shriram Finance, you can invest in a short-term FD to initiate a healthy savings habit. You get interest rates of up to 8.15%* p.a. on a regular FD account which includes 0.50%* p.a. for senior citizens and 0.05%* p.a. for women depositors. Quickly start a fixed deposit online and gain all the benefits that come with it.

Key Highlights:

• Achieving your short-term financial goals becomes easy with a short-term FD.
• Premature withdrawal may be allowed, subject to applicable terms and penalties.
• Interest rates are determined at the time of booking and remain applicable for the selected tenure.
• Market fluctuations typically do not affect the interest rate on a short-term fixed deposit.

FAQs

What are the benefits of a fixed-term deposit?

There are many benefits of a fixed-term deposit. One of the most popular ones is consistent returns. Apart from that, you can also get better interest rates than a regular savings account. It may offer flexibility in tenure selection and payout options depending on the product structure.

Which FD is a better short-term or long-term deposit?

Both types of deposits have their advantages. However, a short-term FD is best for customers who want to earn interest on a lump sum of money for a short period. This type of deposit helps them achieve financial goals and may also reinvest the saved money into a new FD scheme.

What affects the interest rate for a short-term FD?

Interest rates for fixed deposits are influenced by prevailing market conditions, institutional policies, and tenure selection. The applicable rate is determined at the time of booking and remains applicable for the selected tenure, subject to product terms.