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Top Reasons to Invest in a Fixed Deposit

Posted: 29th December, 2022

Updated: 2nd February, 2023

Written by -

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A Fixed Deposit (FD) is a secure investment instrument that requires a one-time investment. An FD makes a great addition to your investment portfolio. You can also use an FD to apply for a loan in times of any financial emergency.

Opening an FD account is easy and helps you develop a healthy saving habit. The interest rates on an FD are higher than that of a regular savings account. Since the interest rate of a fixed deposit is predetermined, there is no risk as the deposit will not be affected by market fluctuations.

A Shriram Fixed Deposit is easy to open as you can initiate the process online. You can use the Shriram FD calculator to check how much interest you can get from a deposit of your specifications. Senior citizens can get interest rates with an additional 0.50% interest per annum on any deposit they open.

What is a Fixed Deposit?

A fixed deposit is an investment instrument which helps you develop a healthy savings habit. You can plan your investments according to your financial goals because an FD has the feature of a flexible tenure. The returns on a fixed deposit are assured and will not change even with market fluctuations. If you ever need money for an emergency, you can avail of a quick loan against a fixed deposit.

Applying for a fixed deposit requires a few documents and is available at banks or Non-Banking Financial Companies (NBFCs). If you already have a savings account at any financial institution you want to open the FD with, you will only have to display the account details to complete the process.


Eligibility Criteria

An account for a fixed deposit can be opened very quickly. The required paperwork and regulations for applying for an FD are listed below:

  • To determine whether you have the resources to apply for an FD, you must check the minimum investment requirement for the bank or NBFC of your choosing.
  • You must be a resident of India. The Non-Resident External (NRE) and Non-Resident Ordinary (NRO) FDs are also accessible upon request.
  • A Passport, Aadhaar card, PAN card, Voter ID, or any other kind of government-issued identification is required as identity proof.
  • Address verification is also necessary. You can apply for an FD by submitting a telephone bill, electricity bill, bank statement with a check, or any other document that includes your address proof.

Features of a Fixed Deposit

The interest rate for an FD account is higher than a regular savings account. Let's explore why an FD is a popular investment option:

  • One-Time Effort:

Once you have invested in an FD, you do not need to keep checking the market to understand how your investment is performing. In this way, people new to investing can carry on with their lives without worrying about the FD's stability. With a Shriram FD, you can apply for auto-renewals and auto-withdrawals on your deposits.

  • Safe and Steady Returns:

The interest rate on your FD is predetermined and not impacted by market fluctuations. Hence, you get assured returns and can earn interest on your FD until maturity.

  • Loan against FD:

You can mortgage your FD in case you need a loan. You can use up to 90% of the FD as collateral to take the loan. Every bank or NBFC has their terms and conditions for the same.

  • Tax-Saving Benefit:

You can claim an FD in your taxes by investing in a tax-saving FD. This type of FD has a fixed tenure of 5 years and does not need special eligibility to apply.

Reasons you should Invest in an FD

  • Payout Term:

A fixed deposit can provide various options for you, but the main two choices that remain consistent are a cumulative and a non-cumulative deposit scheme. These schemes allow you to decide the interest payout frequency. If you need frequent funds for small monthly expenditures like paying bills, instalments, etc., then you can choose a non-cumulative account and get the interest from the FD paid regularly.

But if you want to keep your savings locked up to earn a higher interest rate, you can select a cumulative fixed deposit account. Upon maturity, you will get the accumulated interest and principal deposit credited to your linked savings account.

  • Easy Loan accessibility:

A bank or NBFC will allow you to take up to 90% of the FD amount as a loan against it if you need emergency funds. You can continue earning interest from the FD during the tenure of the loan and won't have to pay any penalty for prepaying the loan amount.

  • Flexibility to Withdraw Funds:

You can easily withdraw funds from a fixed deposit before the maturity date. This facility is known as premature withdrawal. Most financial institutions charge a penalty for such an action. The process of withdrawing the funds is quick and straightforward, making it more convenient for you to receive the amount.

  • Best investment method for any goals:

Since a fixed deposit guarantees assured returns, you can plan your financial goals according to the tenure and interest rates you need. Setting a financial goal is a crucial step to starting your savings journey. A fixed deposit can be aimed at a specific purpose, like kids' education expenses, purchase of a vehicle or home appliances. You can use the Shriram FD calculator to determine the exact amount of interest you can get for tenure and the amount of your choice.

  • Easy to Monitor:

Since the fixed deposit is secure throughout its term, you do not need to monitor its performance regularly. Market fluctuations do not impact the FD as the interest rate is predetermined and won't change until maturity. With a Shriram FD, you can get 0.25% extra interest on a deposit for renewals of all FDs.

  • FDs make a great addition to your investment portfolio:

There are various investment instruments, like gold, equity, mutual funds, etc., that play different roles in building your investment portfolio. Investing in a mutual fund could provide growth potential to your money over the long term, but a fixed deposit offers stability to your portfolio. An investment portfolio with a good and stable diversity of assets can help you make investments more efficiently.

Conclusion

A fixed deposit is one of the most secure investments you can add to your investment portfolio. You can customise your FD according to the financial goals you need to achieve. Flexible tenure and high-interest rates help you develop a healthy savings habit.

Invest in a Shriram FD today to start achieving your financial goals faster. A Shriram FD has a higher interest rate for senior citizens and can help them if they want to create a new FD. You can also apply for an FD by visiting the website and providing the required information.


FAQs

  1. 1. Why should you invest in a fixed deposit?

A fixed deposit is one of the safest investment options customisable to suit your needs.

  1. 2. What are the advantages of an FD?

An FD has a flexible tenure, is easy to renew or withdraw, has tax-saving benefits, and more.

  1. 3. What is the impact of a fixed deposit on investors?

Investors can develop a healthy savings habit without worrying about market fluctuations impacting their deposits.


Key Highlights:

  • Opening an FD is a one-time effort that does not need regular maintenance.
  • An FD is a great addition to your investment portfolio as it is provides security and stability.
  • You can apply for a loan against a fixed deposit.
  • The flexibility in tenure allows you to plan to achieve all your financial goals.
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