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Since the last two years, the ongoing pandemic has very accurately proved that our lives are very vulnerable and unpredictable. This realisation led many people to resort to insurances, deposits, and other investments. All this results in securing our families from the uncertainties of the future. If you want to begin your investing journey with utmost safety and security, you definitely should learn about a fixed deposit, recurring deposit, and other types of deposits. This article will assist you in knowing and evaluating the reasons to invest more time and money in recurring deposits.
Recurring Deposits and Recurring Deposit Accounts
Recurring Deposit accounts have been in the investing market for quite a long time now, and they are still very prominent. Many people of all ages and age groups, indeed gladly put their money in a Recurring Deposit account.
A recurring deposit is made regularly. Many banks and non-banking financial companies provide this service, which allows customers willing to make regular deposits and receive excellent returns on their investments.
Customers can invest an amount they want every month and save a decent amount of funds with simplicity and security through recurring deposits. Recurring Deposit accounts offered by almost all the non-banking financial companies and banks in India generally range from six months to as long as ten years. The recurring deposit interest rates for general citizens fall between 3.50%-5.50% per annum. At the same time, senior citizens get an extra interest of 0.50%-0.80%, alongside the prevailing interest rates.
The investors can build up an enticing amount at maturity by using the recurring deposit accounts’ approach of generating little monthly investments. The recurring deposit interest rates are determined on a quarterly cumulative basis.
Characteristics of Recurring Deposit Accounts
The primary features of a recurring deposit account are mentioned below;
- 1. The recurring deposit interest rate is very similar to the interest rates provided on a fixed deposit. This is often much more than that of all the other savings plans.
- 2. Standing instructions, which happen to be the directions issued by the account holder to the bank to credit the recurring deposit monthly from their savings or current account, can be easily used to finance the recurring deposit.
- 3. The deposit periods on recurring deposits range from as minimum as six months to a long period of ten years.
- 4. A few Indian banks and non-banking financial companies do not have mid-term and premature withdrawals provisions. The remaining ones do have such a provision, but they charge a penalty fee.
- 5. Recurring Deposit (RD) plans or accounts are designed to encourage people to save regularly. Doing so ultimately secures the investors’ family from life uncertainties if any.
- 6. Recurring Deposit provides you with a fixed rate of interest on your investments. The interest is delivered at a specific frequency for a set period, that is, until the maturity of your recurring deposit account.
- 7. Recurring Deposits also offer you the option of obtaining a loan against your deposits by using them as collateral securities. As an account holder, you can borrow up to 80 to 90% of the deposit amount as loans. It all differs from one provider to the other at the end.
- 8. Even though it is evident that the minimum amount you can deposit in your recurring deposit account is different for every provider, this amount can be as minimum and low as Rs.10.
Advantages of investing more time and money on Recurring Deposits
The main benefits of recurring deposit accounts are as follows:
- 1. Recurring Deposit comes with a very appealing rate of return.
- 2. Banks and other non-banking financial companies in India often provide the option of taking out a loan on your recurring investments. Depending on the financial institute you have an account with, you can get a loan on 90%-95% of the entire money you have deposited.
- 3. Recurring Deposits guarantee you returns on the primary funds you have deposited in the short term. This is the opposite in the case of mutual and equity funds.
- 4. One more significant benefit of a recurring deposit investment account is versatility. A few Indian non-banking financial companies and banks even make it possible for you to postpone an instalment. On top of it, they do not even charge anything for doing the same.
- 5. Investing your time and money in a recurring deposit account is a wise decision since the primary investment deposited more often than not yields a profitable return.
- 6. Recurring Deposits happen to be one of the best straightforward financial instruments to invest in. Investing your time and money on recurring deposit accounts is an uncomplicated process.
- 7. All of this combines to make recurring deposits a solid investing choice.
Recurring Deposit Calculator
Before determining the maturation money which the depositor will recover after the predefined time frame, the recurring deposit calculator considers the following criteria:
- 1. The initial deposits were made when the recurring deposit account was opened.
- 2. The starting date and time of the recurring deposit account.
- 3. The interest rate that was agreed on by the lender and the depositor when finalising the recurring deposit account details as well terms and conditions.
- 4. Many Indian banks and non-banking financial companies provide an additional interest rate to senior citizens and the general interest rates. So, this is also taken into account at the time of maturity.
- 1. Investing experts commonly recommend that recurring deposit account holders go for short period tenures because they provide you with a reasonably fair interest rate.
- 2. The earned interest on recurring deposits is taxable. If you opt for an extended recurring deposit account, this tax can be saved.
- 3. Being a recurring deposit account holder, you are eligible to add nominees to your account.
- 4. If you want, you can open a recurring deposit account in your minor child’s name and also as a joint holder with anyone. This is because any individual, minor or adult, is eligible to hold a recurring deposit account.