Fixed deposits (FDs) have long been considered one of the safest and most popular investment options. However, many investors often confuse fixed deposits with time deposits. While the two investment options may appear similar, there are significant differences between the two.
What are fixed deposits?
Fixed deposits (FDs) are a type of term deposit account that offers a fixed interest rate to investors for a fixed term. FDs are a safe and popular investment option, offering higher interest rates than regular savings accounts. The duration of an FD can vary, with interest rates varying depending on the financial institution. Bajaj Finance Fixed Deposit offers a higher interest rate in addition to the trust of the brand. Our FDs are secure as they are backed by CRISIL AAA/STABLE and [ICRA]AAA ratings.
Benefits of fixed deposit
Fixed deposits are a popular investment option because of their low-risk nature. Unlike other investment options, FDs provide guaranteed returns regardless of market fluctuations. Additionally, FDs can be used as collateral for loans or other financial instruments, making them a versatile investment option. If you have opened a Bajaj Finance Fixed Deposit, you can also get a loan against your FD during any emergency.
What is Time Deposit?
Time deposits or term deposits are investment options offered by financial institutions. In a term deposit account, a fixed amount of money is invested for a fixed term at a fixed interest rate. The interest rate on term deposits generally varies, depending on the financial institution. Term deposits are also known as certificates of deposits or recurring deposits. In this, customers can examine the terms of a term deposit on paper statements. The statement covers the required minimum principal amount, the rate of interest paid, and the period to maturity of the deposit, as agreed upon by the depositor and the bank at the outset.
Benefits of Time Deposit
The biggest advantage of a time deposit is that it is a low-risk investment option. Additionally, time deposits provide good returns over the investment period. The lock-in period for a time deposit can range from one month to five years, depending on the financial institution. Investors can choose the lock-in period that best suits their investment goals and risk appetite.
Time Deposit vs Fixed Deposit
While time deposits and fixed deposits may appear similar, there are significant differences between the two. The primary difference is that while time deposits have a fixed term, fixed deposits can be for a fixed term or can be opened without any fixed term. Another significant difference between time deposits and fixed deposits is that time deposits often offer higher interest rates than fixed deposits. While fixed deposits provide a fixed interest rate, time deposits may offer a floating or variable interest rate based on market performance. Additionally, the lock-in period for fixed deposits is often longer than that for time deposits.
Where a fixed deposit earns a greater interest rate if it is retained for a longer period, a term deposit invests a fixed amount over a predetermined period. This means that each payment earns interest for a shorter length of time than the previous payment. For the same maturity term, the interest rate on a fixed deposit is greater than the interest rate on a time deposit. A time deposit, on the other hand, is an easy way to invest for people who have a set monthly investment amount.
As a result, the investment type is decided by the goals and available funds. You can find special tenures of 15, 18, 22, 30, 33, and 44 months on our platform where interest rates offered on a FD is higher than the regular period of investment.
Both time deposits and fixed deposits are safe and reliable investment options in India. While the two may appear similar, there are significant differences between the two. Investors must perform due diligence before deciding which investment option suits their investment goals and risk appetite. It is essential to note that investment decisions should be based on complete knowledge of the various options available to the investor. With this knowledge, investors can make informed investment decisions and achieve their financial goals.