Wednesday, June 14, 2017

How do Fixed Deposits Affect your Financial Stability?



Following the demonetization drive, a lot of banks have seen an increase in investment in fixed deposits. Fixed deposits are a safer option as opposed to market stocks and mutual funds, and they are rarely affected by the volatility of the market.

Investing in the fixed deposit is easier since you have to invest your funds only once throughout the tenure of the deposit as opposed to recurring deposits where you have to keep investing some part of your limited monthly income.



Fixed Deposits


Different banks offer different interest rates which are dependent on their policies, the tenure of the fixed deposit and the amount of money that you want to invest. Not only banks but companies also offer fixed deposits.

The company fixed deposits provide you with a higher rate of interest as compared to bank fixed deposits. Whenever you decide to invest in fixed deposits, it is necessary that you choose a financial institution, lender or company based on their reputation in the market and the rate of interest that they provide.

It is necessary to keep in mind that the income that if you receive more than INR 10, 000 in one financial year, you will have to pay tax on this extra income and the tax amount will be decided based on the tax bracket that you fall into.



Financial Goals


The tenure of the fixed deposit depends on your financial goals. A fixed deposit is dependent on the amount that you invest in and the rate of interest that is paid to you by the financial institutions or lenders. The term of your fixed deposit can range anywhere from 7 days to 20 years.

If you have a large amount of cash that you want to invest, it is advised that you invest in different investment options. This will provide you with financial security since all your investments will not be affected by the volatility of the market.

If you have opted for a short-term fixed deposit, you can extend the tenure of this fixed deposit once it matures and this will help you in increasing your liquidity. 


Whenever you invest your funds, make sure you choose the tenure in such a way that you keep receiving the benefits of your investment in a timely fashion. 


Rate of Interest


The best type of fixed deposit in which you can earn go rate of interest is the one where the rate of interest is calculated the compound interest, with the help of online fd calculator you can check your returns of invested your saving in FD . 

If you are opting for a Non-Banking Financial Institution (NBFC) or a Housing Finance Companies (HFCs) you should consider the nature and stability of their business, the services provided by these companies and credit rating of the companies. 

As credit rating has very less impact on the interest offered by the company’s fixed deposit, it's the investor’s responsibility to check the rating of the company should be AAA rated. 


Financial Emergency


If you are facing a financial emergency, you can break the fixed deposit and use this money. No penalty charges are usually applied by the financial institutions or lenders if you break your fixed deposit before its maturity. 

It offers attractive features like cashless hospitalization benefits, discount rating from 5% to 25% on medical services, doctor on call. In company deposits, new customized options are available for each customer, as per their goals and budget, specialized offers for women, free accidental insurances for the individual investor.


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