Last Updated on February 21, 2023 by admin
Putting your money to work is essential to enjoy a financially secure future. But often, you might be averse to the risks of specific investment options. Considering this, banks offer plenty of safe solutions to grow your wealth the same. These include Recurring and Fixed Deposits.
A Recurring Deposit allows you to make deposits in flexible terms. You earn interest monthly which gets compounded every quarter. A Fixed Deposit, on the other hand, lets you deposit a lump sum for fixed interest. The term ranges from seven days to 10 years, which accumulates interest and is withdrawable upon maturity. Although different in features, specific functions of the two stand similar in many ways. Following are a few explained briefly:
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Both these deposit schemes are fixed-income investments. The Recurring and Fixed Deposits interest rates are predetermined at the beginning of the tenure. They remain consistent throughout the investment period. Moreover, market fluctuations do not affect them. The bank guarantees the returns upon maturity. Hence, you need not worry about market trends affecting your earnings.
The maturity amount of an RD Account is known to you from the time of investment. Such knowledge lets you plan your investment strategy accordingly. It helps you adjust the tenure, interest rate, and investment amount per your financial goals. It also prepares you for future responsibilities like your child’s education, marriage, international tours, home renovations, and other costs.
Ideally, you should not withdraw funds from Bank Deposits before maturity. But, if necessary, you can avail yourself of the premature withdrawal facility. However, this practice attracts a penalty and affects your FD rates. Some banks let you withdraw part of the invested amount for both schemes. If there are subsequent withdrawals, you pay a premature penalty. Thus, it is best to check this aspect beforehand, regardless of which type of Deposit you choose.
Loan against deposits
You get to apply for a Loan against the deposit amount in both schemes. Your reason for the application could be any. However, note that banks set varied limits on the amount you borrow. Therefore, it is wise to check your eligibility on the Banking app. You should also consider the total interest that adds to your principal amount. Doing so gives you an idea of the amount you can borrow.
For either Term Deposit, you must visit the bank’s website or physical branch. The former is more convenient as it clarifies aspects like RD or FD interest rates, investment approach, tenure, etc. It also saves time and eases the application formalities. Secondly, choose a nominee or open the account jointly.
This ensures there is someone to claim the maturity proceeds in your absence. The rule makes Bank Deposits an ideal investment option to make you financially independent.