Fixed deposit (FD) is the most preferred investment instrument in India. People commonly invest in FDs to fulfil economic objectives like residence building, motor automobile buy, wedding, greater education, and so on. A FD can also assistance you program your retirement effectively. However, prior to opening a FD account, investors need to evaluate a handful of variables to maximise the returns.
FD duration
The duration of an FD is straight linked to its interest price. For instance, 10-year fixed deposit returns are normally greater than that of a one-year FD. You can pick out FDs for all varieties of economic goals— brief-term (1-3 years), medium-term (3-5 years), and extended-term (5-10 years).
Rating
Credit rating agencies like CRISIL and CARE evaluate a number of parameters to assign ratings to economic institutions. Any economic institution with CRISIL FAA+ or CARE AA rating is treated as the ideal. Hence, verify the economic institution’s credit rating to minimise your dangers.
Interest price
Currently, the ideal FD interest prices are hovering about 6.70%, and senior citizens can count on a .25% greater interest price. Interest prices are of two types— cumulative and non-cumulative. In the cumulative mode, the invested quantity remains locked till maturity, and the accumulated interest and the principal gets credited at the term-finish. But, in the non-cumulative mode, you can earn a fixed interest quantity just about every month, quarter, half-yearly, or annually. Hence, when opening a FD, pick out the appropriate sort to get the ideal returns.
Loan facility
Generally, people today apply for loans when they need to have dollars urgently. But, when you open a FD, you automatically come to be eligible to avail a loan against it. These loans permit you to withdraw up to 75% of your invested quantity at a 2% greater interest price than the prevailing ideal (highest) FD interest prices. In this case, the loan term equals the FD term. Hence, if you have invested in a 10-years FD and apply for a loan in the second year, you can get eight years for loan repayment.
Financial institution
While all FDs are superior, all economic institutions are not. Analyse the economic institution’s features and worth-added services prior to opening a FD account.
If you want to get the ideal returns from your investment, evaluate these parameters. In the world of investment, time is dollars. And, by investing in an FD instrument that delivers much less than 6.7% today, you threat losing the chance to develop your capital wisely.
Source: Tax Guru