A fixed deposit is an investment policy furnished by banks and other non-banking economic firms. A fixed deposit helps its investors earn returns out of their unused money when invested for a certain period with a good interest rate. After the completion of the duration, the individuals receive the principal amount along with the additional interest. They offer greater returns when compared to a regular savings account. A fixed deposit is much better than any other kind of investment as it offers huge returns and involves a negligible risk aspect. The rates of fixed deposits are independent of market-rate and hence are unaffected by any sort of fluctuation or instability and hence are one of the most secure and safest modes of investment. 

Fixed interest rates

On opening a fixed deposit account, the investor is assured a certain interest rate which would apply to the invested amount for the certain period chosen by the investor. These rates of interest get the revised and amended time and again depending on certain factors. However, this doesn’t affect the rate at which the individual invested in. Suppose an individual is promised an interest rate of 6% per annum. If by any chance the company modifies its rate to 5%, it would still not affect the individual, and he/ she would earn returns at a rate of 6 per cent per annum. This might be a disadvantage in cases where the interest rates elevate, but it is still better to not take risks as there are equal chances of interest rate falling. 

The fixed deposit interest rate is one of the most crucial factors, and it should be carefully compared and contrasted with various firms before finally investing in a bank. The documents and conditions must be carefully read and kept in knowledge before arriving at a certain decision of investment.

Security and safety

Another crucial factor that defines a good decision is one that ensures the safety and protection of the money made towards investment. Fixed deposits offer steady and punctual returns. A person is assured that the money invested in a fixed deposit is sure to provide good returns, unlike other investments that come with market risk. Even if the market crashes, the money would be secured under a fixed deposit account. 

The factors which decide this aspect is a bank’s market integrity, history, and legacy. This measures the credibility and sense of security and assures its depositors about the same.

Returns on the deposited investment 

The amount earned through the savings in the fixed deposit account all depends on the interest rate and the period the money is invested for. 

A person generally gets the opportunity to earn more when he/ she invests for a longer time than the one who invests for a short period. 

However, an individual has always got the option to withdraw the money in cases of emergencies and crises, which makes it very useful and different from other forms of investments that do not provide such an opportunity. People also have the option to reinvest the money to proceed with the investment for a longer period or alternatively request the banker to give payouts on a quarterly or monthly basis. The returns in different cases are likely to vary.

Tenure of investment

Different duration earns a different sum of money. Money invested for a shorter term would earn less when compared to long term investment for the same interest rate. Banks propose adjustable phrases for the same according to an individual’s necessities and requirements. 

Loans against FD:

During times of financial crises, people tend to look for sources of money. If an individual already possesses a fixed deposit account, it would be much easier for him/ her to apply for loans against FD. Loans against FD come under the categorization of secured loans and are time-efficient. Loans against FD could be issued instantly as compared to other sources which might take a longer time due to certain reasons. Loans against FD do not even require to break the Fixed deposit account before the maturity period. 

The loan’s amount in loans against FD would exclusively depend on the money invested towards the fixed deposit. The loan amount issued could be as high as 90 to 95 per cent of the amount deposited.

Anyone who possesses a fixed deposit account including individual holders and joint account holders can all apply for the loan. However, a minor cannot apply for loans against FD. 

Investors who have a 5-year tax-saving fixed deposit are even not eligible for loans against FD.