The Fixed Deposit interest rate is selected from the issuer's published rates based on the chosen tenure. When you know the fixed deposit yield interest rate, you can plan for your financial goals effectively. Therefore, when you make a deposit, it is advisable to calculate the interest so that you know the corpus that you can accumulate.

But how do you do that?

It is simple. There is a formula for calculating the interest that you can earn.

But before we look at the formula, you should know that there are two types of interest calculations on fixed deposit schemes. Let us understand them.

Types of Fixed Deposit Interest Calculations

1.  Simple interest calculation

Under the simple interest mode of interest calculation, you receive a flat interest rate on the amount you deposit.

2.  Compound interest calculation

Under the compound interest mode of calculation, interest is calculated each year on the corpus accumulated at the end of the last year. As a result, you earn interest not only on the deposited amount but also on the interest already added previously.

The formula for Fixed Deposit yield interest rate is:

Now that you know the two types of interest calculations, here is a look at the formula for each:

1. Simple interest = (P * R * T) / 100
2. Compound interest = [P * {(1+R/100) ^ T}] - P

In the above formulae, the values used are as follows:

·       P = the principal, i.e., the amount of money that you deposit

·       R = the  fixed deposit interest rate

·       T = the term of the deposit

Let us understand with the help of a good example:

Say you deposit ₹50,000 in a fixed deposit scheme which pays an interest of 8%* p.a. for a term of 5 years. In this case, you can calculate the yield from the plan under both simple and compound interest as follows:

Using the fixed deposit calculator

While the formulas are pretty simple, and you can work them out to find the fixed deposit yield interest rate, it is a technical calculation. As such, fixed deposit calculators are available, which help you calculate the potential interest with accuracy and ease.

The fixed deposit calculator is an online tool wherein you just need to enter the amount you are depositing, the tenure of deposit, and the interest rate. The calculator then estimates the interest you can earn on the deposit and the amount payable on the maturity. You can also change the deposit amount and/or the tenure as per your needs to find how the interest earnings would change.

Benefits of fixed deposit calculator

A fixed deposit calculatoris a beneficial tool because:

1. It is free of cost.
2. It can give you the interest amount within seconds.
3. The results are mostly accurate and error-free.
4. It is readily available.
5. You can use it as many times as you want.

6.     It helps you compare different  fixed deposit  tenure so that you can choose one which aligns with your goals.

Things to know about fixed deposit interest rate

Fixed deposits give you predictable returns and carry minimal volatility risks. Here are some aspects that you should keep in mind.

1. There are two ways of availing interest- the cumulative basis and the non-cumulative basis. If you choose the first option, the interest earned would be added to your deposit amount and then paid in a lump sum on maturity. Under the second option, however, you receive the interest as and when earned, depending on your chosen payout frequency. Many fixed deposit schemes allow you to choose the interest payment frequency from the monthly, quarterly, half-yearly, or annual mode.

2. Under most schemes of fixed deposits, compound interest is payable. You can compound the interest annually, half-yearly, or quarterly or monthly. If compounding is half-yearly, quarterly or monthly, the formula will change.

3. If you make a premature withdrawal, i.e., withdraw before the term has expired, the financial institution may charge a penalty.

Shriram Fixed Deposit

Shriram Finance offers interest rates of up to 8.15%* p.a., including additional interest benefits of 0.50%* p.a. for senior citizens and 0.05%* p.a. for women depositors.

You can use the Shriram Fixed Deposit calculator to find out the maturity corpus. Just enter the deposit amount and the tenure. The calculator will estimate the interest payable as well as the maturity amount.

Investors may consider Shriram Unnati Fixed Deposit depending on their financial goals and investment preferences.