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What is a Fixed Deposit?
Fixed deposit (FD) is one of the safest investment options through which people can earn relatively higher interest in comparison to a regular savings account. Interest is accumulated on the deposited amount over a fixed period of time. The interest rate depends on the type of lenders (public sector, private sector, or small finance banks). Senior citizens are usually offered higher interest rates. In the case of an emergency, you can easily liquidate your FD and get the funds.
The tenures in fixed deposit schemes are flexible. Investors can choose the tenure according to their convenience.
Once the amount has been deposited in at a specific interest rate, it remains unaffected by further changes in interest rates or market fluctuations. Thus, the returns on your deposit are assured.
With fixed deposits, there are several other benefits such as loan against FD. One can avail loans of up to 90 per cent of your deposit amount at very low interest rates. Investing in tax-saving fixed deposits will fetch tax deductions. FD also provides the option for regular income. One can get the interest sum credited as per the requirements on a monthly, quarterly, or annual basis.
Factors to consider before opening FD -
- Compare various FD interest rates of different banks that help you earn better interest.
- Review the credibility of the lender by examining the fixed deposit’s safety.
- Choose a bank that offers good customer service and a hassle-free process for opening an FD.