Fixed Deposits are a secure, easy, and risk-free way to save your money and earn interest on it. A fixed deposit essentially means investing a sum of money, usually a minimum of ₹10,000, into a deposit scheme for a fixed tenure. And you earn interest on the amount of your investment. that’s why always try to choose the right fixed deposit schemes.
Types of Fixed Deposit Schemes
With a fixed deposit, you can not only save your money but grow it. There are two types of fixed deposit schemes that you can invest in, cumulative and non-cumulative.
Cumulative Deposit:
In this scheme, interest on the deposit amount is credited annually and is paid to you along with the principal at the time of maturity. This scheme is best when you want to build a fund against future goals.
Non-cumulative Deposit:
In this type of deposit, the interest on your deposit is paid out at a predetermined time, such as monthly, quarterly, half-yearly, or annually. The principal is paid at the time of maturity. This scheme is best for saving money and using interest earned from it for regular expenses.
Considerations for Selecting Fixed Deposit Schemes
When you select a fixed deposit, there are certain things to keep in mind to get the best benefit for your investment.
Flexible Tenure
Many fixed deposits have a lock-in period, which means you cannot withdraw your deposit until this term ends. The best schemes have flexible tenure plans from 6 months to 60 months or more.
Simple Application Process
Fixed deposits are a safe and easy way to invest your money, but you don’t want to be burdened by the complicated application processes. Always opt for a scheme that demands lesser documents from applicants.
Premature Withdrawal
It can often happen that you might need to withdraw your deposit for an emergency or to meet any other financial need. To make sure that you don’t pay more than you gain, look for fixed deposits that have nominal or no penalty on premature withdrawal of your deposit. However, in premature withdrawal, you will only get interest accrued till the time of withdrawal and not the full interest.
The Credibility of the Financial Institution
Fixed deposits are not considered risky, but it’s still a good idea to check that the financial institution you are depositing money with is able to repay the amount whenever you need. You can check a company’s financial rating on one of the many credit rating agencies, such as CRISIL, ICRA, or CARE.
Interest
Interest rates are different for each financial institution, and can also vary for residents, NRIs, and senior citizens. In most cases, interest rates offered to senior citizens are 0.5% higher than the regular rates. In most cases, the interest rate will remain the same for the whole tenure of your deposit.
Loan
When you make a substantial deposit, you can use it for collateral against a loan. Depending on your deposit type, you can avail up to 90% of your own deposit as a loan. However, the loan tenure should be the same as the fixed deposit tenure.
Current Fixed Deposit Rates at PNB Housing
Fixed deposits usually have an interest of 6% or higher. An interest rate of 5% or less is not a good investment, so avoid FDs with lower interest over long-term deposits.
The current fixed deposit rates at PNB housing are 6.25% for a cumulative plan of 24-35 months. For the non-cumulative scheme, the rates are 5.98% monthly, 6.01% quarterly, 6.05% for half-yearly, and 6.15% for annual interest.
Documents Required for Starting a Fixed Deposit
Most financiers offer a hassle-free documentation process. A resident individual needs only the following basic documentation.
- FD application form
- ID proof, such as an Aadhar card or PAN card
- Address proof, such as Aadhar card or PAN card
- Photographs
Conclusion
There are a lot of factors to consider when you are choosing a fixed deposit schemes, the most important one being a good rate of interest. Selecting the right fixed deposit is essential to getting the most out of your investment. And when your investment plan is sound, it can help you meet your financial goals faster.
