How does an FD investment impact your life beyond the finances?
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How does an FD investment impact your life beyond the finances?

  • Highlights

  • Understanding fixed deposits and how they work

  • Differences between cumulative and non-cumulative FDs

  • What are the financial and non-financial benefits of FDs

  • See how you can get assured returns with Bajaj Finance FDs

Among the many financial instruments provided by banks and non-banks in the country today, fixed deposits are perhaps the most popular. This variant of a term deposit offers guaranteed returns as well a safety from volatility. And since it is a fairly simple product to understand, it is common investment tool used by most people around you. Let’s take a look at how FDs work and the impact such an investment may have on your life.

When you invest in an FD, you deposit a certain amount of money with a financial institution for a fixed tenure. You earn a fixed rate of interest on this investment, payable at monthly, quarterly or annual intervals over the course of your selected tenor. Once the deposit matures, the principal amount along with the interest earned is returned back to the you. There are two types of Fixed Deposits that you can choose from- Cumulative FDs and Non-Cumulative FDs.
Cumulative FDs: In these type of FDs, the interest is compounded annually and payable only at maturity. The interest earned is also taxable based on the tax slab you fall in.

Non-Cumulative FDs: In non-cumulative FDs, the interest may be compounded on a monthly/quarterly/half yearly or yearly basis with similar interest payout options.

5 Reasons to invest in Fixed Deposits

3 myths about fixed deposits

The two major financial benefits of a fixed deposit investment include safety from market volatility and higher returns than traditional savings account. And while these benefits are well known, there are several non-financial benefits of investing in FDs -

Improves risk appetite

FDs provide a secured source of income enabling users to opt for other high risk financial instruments. High risk instruments are market linked options like ELSS, Mutual Funds, SIPs, etc. Borrowers need to diversify their investment portfolio to ensure greater returns.

Emergency fund

FDs can serve as your emergency fund in case you need money urgently. Almost all financial institutes offer premature withdrawal of FDs and some even offer a loan or overdraft facility.

Can be used in lieu of collateral

If you are planning to opt for a secured loan but do-not have any collateral for the same, your FD certificate can act as a collateral. In such cases your FD will continue to earn interest while you have access to the loan money also.

Saving habit

A fixed deposit can help you in proper financial planning. When you open an FD, you tend to save a particular sum of money with the borrower over a particular period of time. This inculcated a habit of saving money in most first-time lenders.

 

Bajaj Finance offers assured returns of 7.85% on Fixed Deposits across flexible tenors as well as rate benefits on renewal. Learn more to see how you can invest in an FD online.

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