Whether you are a seasoned investor or an investor who is just starting their investment journey, fixed deposits are commonly considered a stable savings option. Low risk coupled with attractive returns makes fixed deposits a viable option for anyone looking to grow their wealth over time. FDs offer flexibility in terms of the maturity period and interest rate. They also offer additional benefits which include an predictable return and the ability to get your principal investment back upon maturity. They can be a great way to protect your wealth and generate additional income.
In this blog post, we will take a look at 6 factors that could influence your fixed deposit investment. From varying interest rates to the financial health of the issuer, certain factors could have a potential impact on your FD investment.
Equipped with this information, you will be able to make more informed decisions about how to invest your money.
1. Financial Standing of the Issuer
The financial health of the company or bank issuing your investment is of utmost importance for protecting your money. When considering investments with the promise of substantial returns, it is important to exercise caution and assess the reliability of the entity offering them. A good way to do this is to look at their balance sheets and other financial statements to gain an understanding of their current financial position.
It is important to do your due diligence with particular attention to their liquidity and ability to pay out returns. FD ratings in India are assigned by credit agencies such as CRISIL, ICRA, India Ratings & Research, CARE and such other bodies after carrying out a comprehensive assessment. It is advisable to review the promoter history and credit grade, as indicated by rating agencies. This will help you evaluate the dependability and financial viability of the issuer.
2. Period of Investment
The period of investment for an FD is closely linked to its interest rate. Consequently, you can always obtain the most competitive rates in the long run.
The typical time frame for FD investments is between 12 months to 60 months. Some financial institutions may offer different FD tenures.
3. Interest Rate
Identifying a fixed deposit that provides a competitive interest rate for an FD is essential to maximising returns. A cumulative FD yields both principal and accrued interest at the end of the investment tenure. A non-cumulative FD provides interest distributions periodically, such as monthly, quarterly, half-yearly or annually. In a nutshell, it is important to note that the interest rates may differ for each payout option. Make use of the Shriram Fixed Deposit Interest Calculator to calculate the interest on your investment amount.
4. Early Withdrawals
FDs can typically be withdrawn before maturity. This is subject to a reduced interest rate and any other conditions as specified by the bank or financial institution, such as a penalty for early withdrawal of the FD. In times of crisis or emergency, this is especially valuable when quick access to funds is required.
Note that for certain types of FDs, early withdrawals may not be allowed. In the event of a joint deposit, all account holders must provide a statement of consent to the bank or corporate. This is required so that the surviving account holders may be eligible to receive the maturity proceeds in the event of the death of one of the holders.
Therefore, if you are assessing liquidity, it is recommended to evaluate the possibility of early withdrawals and the associated terms and conditions.
5. Interest Investment Options
When investing in fixed-term deposits, there are several viable options available, such as reinvestment of interest at a quarterly rate, receiving interest payments quarterly, or collecting monthly interest payments. Take your financial needs into consideration when selecting these options.
6. Borrowing Against Fixed Deposits
Many financial institutions provide the ability to borrow against an FD. Being able to access funds quickly in times of need without having to liquidate investments is particularly beneficial.
You can access about 75% of the funds deposited in an FD. It is recommended to utilise a secured loan process wherein an FD may be provided as collateral to obtain a loan. In this instance, it is not necessary to break your investment or opt for early closure.
In addition to this, you will be eligible for a loan against FD with minimal paperwork, while continuing to earn interest on your investment. It should be noted that interest is levied on the actual amount utilised and for the duration of use.
Conclusion
Fixed deposits have been a popular mode of investment in India for several decades. If you are an investor, Shriram Fixed Deposit is a secure investment opportunity that offers predictable returns. FD investments have their own unique set of risks and rewards.
Shriram Fixed Deposit offers interest rates as high as 8.15%* p.a., including of 0.50%* p.a. interest rates for senior citizens and 0.05%* p.a., for women investors. If you are looking for a reliable and profitable investment opportunity, book Shriram Fixed Deposit now!
FAQs
What are the advantages of investing in an FD?
One of the primary advantages of investing in an FD is the predetermined interest rate for the chosen tenure. Additionally, the tenure of the FD is flexible depending on the financial institution. Apart from this, premature withdrawal may be possible, subject to applicable terms.
What is the minimum amount required to open an FD account?
The minimum amount to open an FD account is ₹5,000 with Shriram Finance. It depends on the criteria set out by each bank or NBFC.
Are there any special rates available for women investors?
Yes, some banks and NBFCs provide women depositors with additional benefits on FDs. Shriram Fixed Deposits offer women investors an additional 0.05%* p.a. interest rate.
What will be the result of the early closure of my FD?
If you want to close your FD before the maturity date, a penalty has to be paid when you withdraw the amount.