A fixed deposit is a saving instrument where you can deposit a sum of money for a fixed period of time and you get can earn interest on the same. On maturity of the fixed deposits, the depositor gets back the interest earned along with his principal amount that he had invested.
Reasons to Invest in Fixed Deposits
A fixed deposit is one of the most popular saving schemes in the country today with most of the banks and financial institutions offering the same to its customers. Some of the reasons to invest in fixed deposits are as follows:
- As you get assured returns once the fixed deposit matures, it is known to be one of the safest options available for investment. Most of the other saving schemes have a risk attached to them and there is no assurity on the returns. Whereas in fixed deposits you will get guaranteed returns.
- As compared to a regular saving account, the rate of interest on fixed deposits is higher. As you deposit the money for a fixed tenure, the banks offer a higher rate of interest.
- Fixed deposits can be a savior if you suffer from a cash crunch. You do not need to take a personal loan at a very high rate of interest in times of an emergency as you are eligible to take a loan against your fixed deposit. You can take a loan for an amount of 90% of the amount invested in fixed deposits.
- Fixed deposits are flexible and this is one of the main advantages. You can decide the amount you need to invest and also the time period for which you can invest. You can choose any period from 7 days to 10 years. You can start investing with a low amount and there is no compulsion to pay a certain amount monthly or annually. This gives a lot of flexibility and also helps to start saving with smaller amounts. Also, though the amount is invested for a fixed period, there is an option to withdraw the money before the maturity of the deposit which also comes in handy at the time of an emergency.
- The saving instrument is helpful in inculcating the habit of saving.