Fixed deposits (FD) are the financial tools that the banks or the Non-Banking Financial Companies (NBFC’s) offer. It is also called as a term deposit. People have to go to a bank to open a fixed deposit or invest through net banking apps.
There are several types of fixed deposits. They are:
1.Regular fixed deposits (with regular interest)
2.A Flexi fixed deposit (it has a swipe in the facility, it is directly linked to the savings account, and the banks transfer the excess directly into the fixed deposit)
3.A tax-saving fixed deposit (banks lock the deposit for five years with tax exemption)
4.A senior fixed deposit (it is suitable for people over sixty years and provides nearly one-per cent additional interest)
5.Shareholders’ fixed deposit (it is for the people holding the shares of a company and provides nearly one-per cent interest).
Benefits of investing in fixed deposits:
- Fixed deposits offer assured returns, with high safety to the sum invested.
- The stock market volatility (highs and lows) does not affect the returns.
- Fixed deposits provide flexibility to invest in the tenure of our choice.
- The fixed deposits offer tenures ranging from seven days to ten years.
- Investors can use a fixed deposit as a loan.
- Banks allow access to fixed deposits is at any point.
- There is a flexibility of breaking the fixed deposit at the desired time.
- A fixed deposit can also be tax beneficial. The tax saver fixed deposit can be opened for five years.
- It offers higher interest rates.
- One can open multiple fixed deposits at the same time.
How To Calculate The Fixed Deposit Interest Rate?
The interest attained on the fixed deposit amount is of two types. They are:
1) Simple interest, where the principal amount remains constant. The interest added in the first-year is not taken into account for the calculation of principle the following year.
[Simple interest = capital amount * Rate of interest * term]
2) Compound interest or cumulative interest, where the principal amount keeps changing with the addition of interest. The amount of principal increases the following year.
The amount received after Compound interest = [Principal amount ( 1+ interest rate/ number of times the interest ) *number of periods* number of times interest ]
Banks give the interest rates on the fixed deposits with intervals or at maturity. The rates of interest vary with time and the banks.
Online Tools For Fixed Deposit Interest Rate Calculation:
There are various online calculators of interest on the fixed deposits along with the information of various banks and their interest rates.
Banks propose the interest rates of the fixed deposit. It may vary based on a few other factors.
1) Inflation: The interest rate is high during the periods of inflation (increase in the costs).
2) RBI (Reserve Bank of India): RBI might adjust (increase/decrease) the financial parameters like Cash Reserve Ratio (CRR), liquidity, etc. The adjustments made by RBI around these parameters impact the interest rates offered by the banks.
3) Recession: The rate of interest is low during the recession (sluggish economy).
Online Fixed Deposit Interest Rate Calculators:
The fixed deposit calculators are easy to use and provide accurate results. We can determine, in a simple manner, the pre-planned amount received at maturity, without the use of an actual calculator, without any knowledge of the formulae or any hassle. It allows the investors to calculate the interest rates and compare the fixed deposit interest rates of different banks and interest rates with varied time. Here is an example of a FD calculator: https://www.moneycontrol.com/fixed-income/calculator/fixed-deposit-calculator.html
After calculating the interest rate on the fixed deposits, the calculators show the amount received after the maturity.
In any fixed deposit calculator, provide the principal amount or the amount you want to deposit. Provide the term (number of days, months, or years) for which you want to create the fixed deposit. You also have to give details of the interest, as proposed by the bank in which you choose to invest. The fixed deposit calculators also have the option of choosing the periods of pay-outs. The periods range from monthly, quarterly, or at maturity. By choosing the desired pay-out, select the “calculate” option.
These calculators enable us to choose wisely the duration of fixed deposits, interest rates offered by several banks, and pay-outs. The automated and computerized results leave no scope for human error.
Scripbox FD calculator:
An example of the online fixed deposit calculator is the scrip box FD Calculator. It provides space for the users to enter the amount that they wish to invest. The pay-outs or the duration at which the interest rate is to calculate. The online tools provide the total duration of FD, and we can select the time, by sliding on the bar. Select the interest rate as proposed by the bank, for the desired duration, in a similar manner. After providing all the required details, click on the “calculate now” button.
The scrip box provides a clear graph with the difference between the rate of investment and the rate at maturity. The difference is visible and enables the user to either proceed or cancel the investment based on it. It also has a feature that displays the options better than the FD, along with other investment options. Click here to calculate FD interest rate.
Policybazar interest rate calculator:
In a famous site named policybazar, the user has to mention the name of the bank. The users choose the term for which they want to open the fixed deposit account and the amount to invest. There is an option that allows us to choose whether the investor is a senior citizen or not. The site reveals the amount obtained at maturity by clicking the “calculate” option. The site also reveals the interest rates offered by several banks. Click here to calculate the interest rate on fixed deposit rate on the fixed deposits.
Fixed deposits are better than open-ended investments like mutual funds. In the fixed deposits, it is easier to know the amount at return. It is risk-free, and the banks pay the interest based on the prevailing interest rates, at the deposit. It is the best way to invest money during a volatile market, like now. This is the right time to invest in FD. Happy investing!!