Fixed deposits (FDs) are an excellent savings tool that provides a profitable rate of return and ensures the safety of your principal amount. But when it comes to choosing between the payout options, you need to understand the difference between the two.
What is interest payout option in FD?
Any individual who opens a fixed deposit gets interest on the deposit amount. The frequency in which the investor wants their interest payment to be released is called the interest payout. The interest payout at offered are monthly, quarterly, half-yearly and yearly. These payout options can be chosen by the investor based on their income requirement or short-term and long-term goals.
Interest payout at the above-mentioned frequencies are mostly available with non-cumulative FDs. With cumulative FD, the payout happens only at maturity. Let us know more about these two types of FD.
What are cumulative and non-cumulative FDs?
Cumulative FD: In case of a cumulative FD, you earn interest on the deposited amount, which is accumulated and paid out along with the principal amount at maturity. This means you receive the entire interest on the maturity date.
Non-cumulative FDs: In case of a non-cumulative FD, the interest earned on the deposited amount is paid out at regular intervals, which can be monthly, quarterly, half-yearly, or yearly. In this case, the interest you earn is paid as per the deposit term and the frequency chosen, while the principal amount is paid at maturity.
Here are some of the advantages of each type.
Benefits of cumulative FDs
1. Accumulated interest rate:
Cumulative FDs usually have a higher interest rate than non-cumulative FDs since the annual interest is also re-invested in the deposit.
2. Greater return:
As the interest is compounded over the tenure, you earn a greater return at maturity.
3. Long term goals:
Cumulative FDs are ideal for long-term goals, and they encourage disciplined savings.
Benefits of non-cumulative FDs
1. Regular income:
Non-cumulative FDs offer periodic pay-outs, making them suitable for individuals who require regular income.
2. Payout Flexibility:
You can choose the frequency of interest pay-out as per your requirement. Bajaj Finance FD has the option to choose monthly, quarterly, half-yearly and yearly payouts.
3. Dedicated short-term goal:
Since there is a regular payout, depending on the frequency, you can dedicate this fund to a particular goal like financing a course or paying for a membership.
At Bajaj Finance, you can choose between both cumulative and non-cumulative FDs, with tenures ranging from 12 months to 60 months. Our FDs offer attractive interest rates and additional benefits such as flexible interest pay-out options, special tenures, online account management, and easy renewal options. With high credit rating and assured returns, you can be assured of a safe and secure investment with Bajaj Finance Fixed Deposit. Invest in our fixed deposit and watch your money grow with ease.