A fixed deposit refers to investing a sum for a fixed period. The reason why fixed deposits are preferred is that the interest is high compared to a savings account. Multiple investment options are highly affected by market fluctuations. On the other hand, fixed deposits (FD) are risk-free investments that allow investors to set aside a sum of money for a period. FD investment is a trusted way to increase wealth without worrying too much about the adverse effect of market fluctuations. FD is favourable to investors as it is easily accessible. If you are looking to invest in an FD, there are three factors you need to consider.
#1: Eligibility Criteria
You must check the eligibility criteria for a fixed deposit before applying. The criterion can vary for every bank or financial institution. The type of fixed deposit also may affect the eligibility requirement. The criteria to be eligible for fixed deposits are:
● An investor must be above 18 years of age for regular FD and above 60 years for senior citizen FD.
● One must be an Indian resident. Non-Resident Individuals (NRIs) must invest in an NRI FD.
Other than individual investors, sole proprietorship, partnership firms, Hindu Undivided Family (HUF), clubs, associations and more are also eligible for fixed deposits. The eligibility criteria vary based on a bank or Non-Banking Financial Company (NBFC).
#2: Documents Required
A few documents are required to make an investment or open an account in a bank or financial institution. Preparing the documents while applying for a fixed deposit is better to make the process stress-free. These documents serve as proof of the identity of the investor. Banks must know their customer and their credit and financial profile to approve an application. When you open an FD online, you just need to insert your Aadhaar and PAN Card number for the verification process. To complete the application, enter the OTP you have received on your Aadhaar linked mobile number.
#3: Interest rates offered
The fixed deposit interest rate is an essential factor that has to be kept in mind while choosing a fixed deposit. The applicable interest rate varies depending on the FD’s tenure, type of FD, and more. Research and comparison of different fixed deposits will make you understand the changes in interest rates. An investor can choose a type of fixed deposit with varying frequencies of payouts. Opt for FD with regular payouts if you want steady returns and a single payout if you can block your funds for a long period.
Check the features of a fixed deposit like eligibility criteria, documents required and fixed deposit interest rate. Proper research will help you choose a suitable fixed deposit.
Advantages of Investing in a Fixed Deposit
Some of the top benefits of FD investment are:
● Flexible tenure:
An investor can choose the term of fixed deposit, and the minimum tenure is seven days. The maximum tenure can be up to 240 months or more, depending on the bank or NBFC.
● High-interest rate:
The interest on a fixed deposit is calculated on a compound interest basis which will increase your investments quickly. The returns on an FD investment are guaranteed and constant throughout the term of the FD. The longer the loan tenure, the interest rate and the total interest increase.
● Tax savings:
An investor can save tax on both principal and interest amounts of a fixed deposit. If your goal is to save tax on investments, opt for a tax-saving FD that has a fixed tenure of 5 years and premature withdrawal is charged with a penalty.
● Credit card facility:
You can avail loan against fixed deposits without additional charges. A Credit Card against FD has low interest compared to other options. Taking a credit against FD is a quick and easy process that saves a lot of money for the customers.
Fixed deposits have many attractive features which vary depending on the type of fixed deposit. Fixed deposits are very secure investment tools and are one of the most preferred in India. Go through the specifications of an FD to get the best-fixed deposit interest rate. The issuer’s reputation is also essential to judge the credibility and returns from investments.