How Premature Withdrawal of Fixed Deposits Affects Your Interest Calculation?
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How Premature Withdrawal of Fixed Deposits Affects Your Interest Calculation?

  • Highlights

  • Interest will now be calculated on the new time frame

  • You may not get the original earnings on early withdrawal

  • You will also have to pay a premature withdrawal penalty

  • Break your FD only if the net gains will be higher

Keeping your fixed deposits secure until maturity helps you grow your savings, and gain from your fixed and steady interest rates. However, unforeseen circumstances may push you to break your fixed deposits prematurely.

Here’s a lowdown on how your interest calculation is affected by your premature withdrawal.

Interest calculation as per original interest rate:

Let’s assume that you’ve invested a sum of Rs.10 lakh over a tenor of 48 months, with an Attractive interest rate. This interest rate is set for 48 months. Say, you want to withdraw the FD after 12 months. The interest will be calculated at the former rate, which was the rate of interest on a one-year FD when you first opened the fixed deposit.

As a result, you will lose out on a significant sum of money that you would

have otherwise earned. So, if you complete the tenor you will receive Rs.13.6 lakh. But, if you withdraw in a year’s time, you will only get Rs.10.7 lakh.

So, before you choose premature withdrawal, do the calculation and be prepared to receive a lower return. If not, try to fund emergency situations using other modes of finance like personal loans, cash reserves or the sale of an asset. This way you can keep your FD intact until the lapse of the tenor.

Additional Read : 4 Ways To Make Your Retirement Fund Pay You a Monthly Salary

Premature closure penalty:

Depending on the lender that you have chosen, you may have to pay a significant sum of money as penalty. This could range from 0.55% to even up to 1% of the FD amount. So, before you prematurely close your FD, ensure that you are prepared to pay this penalty.

Choose a lender that makes premature withdrawal easy and has flexible terms. Consider opening a Fixed Deposit with Bajaj Finance, which charges a low premature withdrawal fee while offering an attractive rate of interest.

Additional Read : How to get a monthly income with an investment of Rs.50 lakh?

Losing interest if you withdraw and re-invest:

In some cases, you may withdraw your FD to invest it another FD that is offering higher interest rate. It could be a wise decision, if you profit after paying the penalty charges. If not, keeping your FD intact makes more sense.

Instead of breaking your FD, you can consider taking a loan against fixed deposits. This is a wise move that prevents you from depleting your finances, while also ensuring enough liquidity to help you meet your emergency needs.

Bajaj Finance Fixed Deposit Calculator

Before you liquidate your fixed deposits, ensure that you’re aware of the various withdrawal terms set by your lender. These terms may change periodically, so make sure you’re aware of these beforehand.

Bajaj Finance is now offering high rate of interest up to 9.10%*

*For senior citizens, on a cumulative scheme tenor of 36-60 months

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